The Financial Statements

Abstract

Financial reporting is about the “true and fair view” disclosure of a business, that is presented in different documents: the Balance Sheet (the Statement of the Financial Position), the Profit and Loss Account (Income Statement), the Cash-Flow Statement, the Statement of Changes in Equity, accounting policies and explanatory notes. Each of them provides a different type of information to users and feeds in the decision-making process. Financial statements follow the rules set in the structure and disclosure requirements within the IAS/IFRS Standards. This chapter analysis individually each Financial Statement, based upon the IASB’s framework and the relationships among them. Readers will be able to understand the relationship in between financial reporting, time and value within a business. This chapter also sets the basics for the accounting specialized jargon. Practical examples of evaluating the financial position of companies are provided, as well as a case study and specific examples and exercises, on a case-by-case basis. The chapter ends with some conclusions in the form of questions and answers.