What’s The Difference Between Private Company and Public Company Reporting?

A public corporation is a business whose securities are traded on the public stock exchanges, such as the New York Stock Exchange and Nasdaq. A private company is held solely by its owners and is not traded publicly. When the shareholders of a private business receive periodic financial reports, they are entitled to assume that their financial statements and footnotes are prepared following GAAP. Otherwise, the president or chief officer of the business should clearly warn the shareholders that GAAP has not been followed in one or more respects. The content of a private business’s annual financial report is often minimal. It includes the three primary financial statements – the balance sheet, income statement, and statement of cash flows. There’s generally no letter from the chief executive, no photographs, no charts.

In contrast, the annual report of a publicly-traded company has more bells and whistles to it. There are also more requirements for public company reporting. These include the management discussion and analysis (MD&A) section that presents the top managers’ interpretation and analysis of the business’s profit performance and other critical financial developments over the year.

Another section required for public company reporting is the earnings per share (EPS). This is the only ratio that a public business must report, although most public companies report a few others. A three-year comparative income statement is also required.

Many publicly owned businesses make their required filings with the SEC, but they present very different annual financial reports to their stockholders. Many public companies include only condensed financial information rather than comprehensive financial statements. They will generally refer the reader to a more detailed SEC financial report for more specifics.