Financial Statements

General Purpose Financial Statements

• Statement of Financial Position
• Income Statement/ Statement of Comprehensive Income
• Statement of Changes in Equity
• Statement of Cash Flows
• Notes to Financial Statements
Financial Statements
Financial statements are the means by which the information
accumulated and processed in financial accounting is periodically
communicated to the users.

Financial statements are structured financial representation of the

financial position and financial performance of an entity
General Purpose Financial Statements
- Are those statements intended to meet the needs of users who are
not in a position to require an entity to prepare reports tailored to their
particular information needs
Objectives of Financial Statements
To provide information about the financial position, financial
performance and cash flows of an entity that is useful to a wide range
of users in making economic decisions
Financial Statements provide information
about:
• Assets
• Liabilities
• Equity
• Income and expenses, including gains and losses
• Contributions by and distributions to owners in their capacity as
owners
• Cash flows
Financial Position
• Comprises the assets, liabilities and equity of an entity at a particular
moment in time
• Pertains to the liquidity, solvency, and the need of the entity for
additional financing
• Presented in the Statement of Financial Position
Financial Performance
• Comprises the revenue, expenses and net income or loss of an entity
for a period of time
• Performance is the level of income earned by the entity through the
efficient use and effective use of its resources
• Also known as results of operations
• Portrayed in the income statement and statement of comprehensive
income
Cash Flows
• Cash receipts and cash payments arising from operating, investing
and financing activities of the entity
• Presented in the Statement of Cash Flows
• Useful in assessing the ability of the entity to generate cash and cash
equivalents
Financial Reporting
• Provision of financial information about an entity to external users that
is useful to them in making economic decisions and for assessing the
effectiveness of the entity’s management
• Financial information is provided to external users through annual
financial statements
• Encompasses not only financial statements but also other means of
communicating information that relates directly or indirectly to the
financial accounting process
• Financial reports also include financial highlights, summary of important
financial figures, analysis of financial statements and significant ratios,
nonfinancial information and list of corporate officers and directors.
Kindly review your Conceptual Framework for Financial Reporting for
more concepts on financial reporting.
Responsibility for Financial Statements
• The management of an entity has the primary responsibility for the
preparation and presentation of financial statements
• The management is accountable for the safekeeping of the resources
and their proper, efficient and profitable use.
• The Board of Directors reviews and authorizes the financial statements
for issue before these are submitted to the shareholders of the entity
• Shareholders are interested in information that helps them assess how
effectively management has fulfilled this role as this is relevant to the
decision concerning their investment and the reappointment or
replacement of management.
General Features of Financial Statements
• Fair Presentation and Compliance with PFRS
• Going Concern
• Accrual Basis
• Materiality and aggregation
• Offsetting
• Frequency of reporting
• Comparative information
• Consistency of presentation
Assignment
• Discuss each feature of financial statements presented above and be
able to give a simple example of a scenario/case that depicts each
feature. (To be submitted on February 1 for BSA 2A, and February 2
for BSA 2B)
• You may refer to the Conceptual Framework for Financial Reporting
and PAS 1 – Presentation of Financial Statements, for more topic
details.
Reference:
Valix, Conrado T., et.al.
Intermediate Accounting Volume 3
2019 edition

Conceptual Framework for Financial Reporting

PAS 1 – Presentation of Financial Statements