Non-financial information is as important as financial information in the process of decision-making. Both pieces of information provide insights that are valuable to stakeholders. Non -financial information has an impact on financial information. It affects the accounting equation in one way or another.
Non-financial information can be external or internal. The internal information includes objectives of the human resource manager, strategic vision of the management, customer satisfaction, employee satisfaction, and governance policies. The latter can be used in the process of decision making to identify internal controls and inappropriate business methods. Moreover, they use the information to uncover fraudulent activities in the business. External information concerns the market in which the business operates. Mostly, it involves competition and legislation.
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Corporate social responsibility information is also part of financial information. Management and stakeholders rely on the information to make decisions concerning the social activities of the business (Mbabazize, et al., 2015). Although corporate social responsibility is charity work conducted by the business towards community development, it has financial gains. The business markets its brand and ensures customer loyalty through CSR. Consequently, the business gains financial returns and increased productivity. Notably, information concerning corporate social responsibility is significant in the process of decision-making.
For stakeholders to make sound decisions, they should be provided with reports of the performance of the business. Notably, that includes both financial and non-financial reports. However, they should be careful to understand the effects of the decisions they make on the accounting equation of the business. The reason for the latter is that in the process of using non-financial information to make decisions, the financial information will be affected in the future.
References
Mbabazize, M., Daniel, T., Claude, M., & Shukla J. (2015). Reporting of Non-Financial Information and Its Impact on the Decisions Taken in Private Institutions in Rwanda: Case Study Northern Province. International Journal of Small Business and Entrepreneurship Research.
