Financial statements

It is not really necessary to define financial statements, but because IFRS is the frame within which IFRS statements are prepared and because there are quite a few different definitions within IFRS relating to and specifying types of financial statements here a those definitions and some other sorted remarks and explanations.

Financial statements – are a structured representation of the financial position and financial performance of an entity. The objective of these accounts is 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. These accounts to a certain extent also show the results of the management’s stewardship of the resources entrusted to it. (IAS 1 9 – 46)

Consolidated financial statements – are the the statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its directly and indirectly owned subsidiaries are presented as those of a single economic entity. (IFRS 10 Consolidated financial statements and IAS 27 Separate financial statements Definition) In an enclosure to the consolidated accounts may times also the parent company financial statements are included.

Unconsolidated financial statements – The accounts of a reporting entity whose boundary is based on direct control only.

Separate financial statements – are those presented by an entity in which the entity could elect, subject to the requirements in IAS 27 Separate financial statements, to account for its investments in subsidiaries, joint ventures and associates either at cost, in accordance with IFRS 9 Financial Instruments, or using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

Separate accounts are unconsolidated accounts and those presented in addition to consolidated accounts or in addition to the financial accounts of an investor that does not have investments in subsidiaries but has investments in associates or joint ventures in which the investments in associates or joint ventures are required by IAS 28 to be accounted for using the equity method.

Company financial statements – these are not defined by IFRS as such, but are a common financial identification of the separate financial accounts of the parent company included in the consolidated financial accounts of that parent.

When a parent elects not to prepare consolidated financial accounts and instead prepares separate financial accounts, it shall disclose in those separate financial accounts:

1. the fact that the financial accounts are separate financial accounts; that the exemption from consolidation has been used; the name and principal place of business (and country of incorporation, if different) of the entity whose consolidated financial accounts that comply with International Financial Reporting Standards have been produced for public use; and the address where those consolidated financial accounts are obtainable.
2. a list of significant investments in subsidiaries, joint ventures and associates, including:
   1. the name of those investees.
   2. the principal place of business (and country of incorporation, if different) of those investees.
   3. its proportion of the ownership interest (and its proportion of the voting rights, if different) held in those investees.
3. a description of the method used to account for the investments listed under (b).

Content of Financial Statements – In general each type of financial accounts consists of Statements of Financial Position (or Balance Sheets), Statements of Profit or Loss and Other Comprehensive Income (or Income Statements) and Notes to the Financial Statements. Under IFRS there also need to be added Statements of Cash Flows and Statements of Changes in Shareholders’ Equity. The main statements (Statements of Financial Position, Statements of Profit or Loss and Other Comprehensive Income, Statements of Changes in Shareholders’ Equity and Statements of Cash Flows also consist of the current year of reporting and the comparatives from the previous year.

Note: The comparatives are sometimes reclassified or adjusted from their original year inclusion in the financial accounts to align to the presentation and/or measurement base in the current year. This is because consistency in reporting from year-to-year is an important concept to facilitate users of financial accounts.

Financial statements