Reporting Cost Details

As we shall see in Part 5, operating costs fall into categories which behave quite differently under changing volumes of business. Variable costs tend to vary in direct proportion to production levels; programmed costs are budgeted annually in corporate plans, for example advertising and research and development costs; long-run fixed costs change little in total with changes in output.

Some knowledge of a company's cost structure is needed by the investor if reliable forecasts are to be made which take account of the impact of changing output levels on profits. The ability of investors to make such forecasts is impeded by the omission in financial reports of information about a company's cost structure. This problem will be examined further in Part 5, where the effects of SSAP 9 'Stocks and Work in Progress' on investment decisions will be discussed.


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Read on: Other Aspects of the Disclosure Problem Interim Financial Reporting

Other aspects of the disclosure problem Interim financial reporting

Interim financial reports provide financial information for a period of less than one year. In the United Kingdom quoted companies have to deliver a six-monthly report of profitability and financial position to their shareholders. In the United States the disclosure requirement is on a quarterly basis. Interim reports are not audited.

One normative characteristic of the process of reporting to users discussed previously was that of timeliness. The aim of interim reports is to provide users with more timely information... see: Other Aspects of the Disclosure Problem Interim Financial Reporting