presentation of revenue in financial statements

The IFRS Foundation is a not-for-profit, public interest organisation established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.

Our Standards are developed by our two standard-setting boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB). 

About the IFRS Foundation

Ifrs foundation governance, stay updated.

IFRS Accounting Standards are developed by the International Accounting Standards Board (IASB). The IASB is an independent standard-setting body within the IFRS Foundation.

IFRS Accounting Standards are, in effect, a global accounting language—companies in more than 140 jurisdictions are required to use them when reporting on their financial health. The IASB is supported by technical staff and a range of advisory bodies.

IFRS Accounting

Standards and frameworks, using the standards, project work, products and services.

IFRS Sustainability Disclosure Standards are developed by the International Sustainability Standards Board (ISSB). The ISSB is an independent standard-setting body within the IFRS Foundation.

IFRS Sustainability Standards are developed to enhance investor-company dialogue so that investors receive decision-useful, globally comparable sustainability-related disclosures that meet their information needs. The ISSB is supported by technical staff and a range of advisory bodies.

IFRS Sustainability

Education, membership and licensing.

IAS 1 Presentation of Financial Statements

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IAS 1 sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. It requires an entity to present a complete set of financial statements at least annually, with comparative amounts for the preceding year (including comparative amounts in the notes). A complete set of financial statements comprises:

• a statement of financial position as at the end of the period;
• a statement of profit and loss and other comprehensive income for the period.  Other comprehensive income is those items of income and expense that are not recognised in profit or loss in accordance with IFRS Standards.  IAS 1 allows an entity to present a single combined statement of profit and loss and other comprehensive income or two separate statements;
• a statement of changes in equity for the period;
• a statement of cash flows for the period;
• notes, comprising a summary of significant accounting policies and other explanatory information; and
• a statement of financial position as at the beginning of the preceding comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.

An entity whose financial statements comply with IFRS Standards must make an explicit and unreserved statement of such compliance in the notes. An entity must not describe financial statements as complying with IFRS Standards unless they comply with all the requirements of the Standards. The application of IFRS Standards, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. IAS 1 also deals with going concern issues, offsetting and changes in presentation or classification.

Standard history

In April 2001 the International Accounting Standards Board (IASB) adopted IAS 1 Presentation of Financial Statements , which had originally been issued by the International Accounting Standards Committee in September 1997. IAS 1 Presentation of Financial Statements replaced IAS 1 Disclosure of Accounting Policies (issued in 1975), IAS 5 Information to be Disclosed in Financial Statements (originally approved in 1977) and IAS 13 Presentation of Current Assets and Current Liabilities (approved in 1979).

In December 2003 the IASB issued a revised IAS 1 as part of its initial agenda of technical projects. The IASB issued an amended IAS 1 in September 2007, which included an amendment to the presentation of owner changes in equity and comprehensive income and a change in terminology in the titles of financial statements. In June 2011 the IASB amended IAS 1 to improve how items of other income comprehensive income should be presented.

In December 2014 IAS 1 was amended by Disclosure Initiative (Amendments to IAS 1), which addressed concerns expressed about some of the existing presentation and disclosure requirements in IAS 1 and ensured that entities are able to use judgement when applying those requirements. In addition, the amendments clarified the requirements in paragraph 82A of IAS 1.

In October 2018 the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8). This amendment clarified the definition of material and how it should be applied by (a) including in the definition guidance that until now has featured elsewhere in IFRS Standards; (b) improving the explanations accompanying the definition; and (c) ensuring that the definition of material is consistent across all IFRS Standards.

In February 2021 the IASB issued Disclosure of Accounting Policies which amended IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements . The amendment amended IAS 1 to replace the requirement for entities to disclose their significant accounting policies with the requirement to disclose their material accounting policy information.

In October 2022, the IASB issued  Non-current Liabilities with Covenants . The amendments improved the information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with covenants. The amendments also responded to stakeholders’ concerns about the classification of such a liability as current or non-current.

Other Standards have made minor consequential amendments to IAS 1. They include Improvement to IFRSs (issued April 2009), Improvement to IFRSs (issued May 2010), IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 12 Disclosures of Interests in Other Entities (issued May 2011), IFRS 13 Fair Value Measurement (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Annual Improvements to IFRSs 2009–2011 Cycle (issued May 2012), IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013), IFRS 15 Revenue from Contracts with Customers (issued May 2014), Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) (issued June 2014), IFRS 9 Financial Instruments (issued July 2014), IFRS 16 Leases (issued January 2016), Disclosure Initiative (Amendments to IAS 7) (issued January 2016), IFRS 17 Insurance Contracts (issued May 2017), Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018) and Amendments to IFRS 17 (issued June 2020).

Related active projects

IFRS Accounting Taxonomy Update—Primary Financial Statements

Related completed projects

Clarification of the Requirements for Comparative Information (Amendments to IAS 1)

Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

Definition of Accounting Estimates (Amendments to IAS 8)

Disclosure Initiative (Amendments to IAS 1)

Disclosure Initiative (Amendments to IAS 7)

Disclosure Initiative—Accounting Policies

Disclosure Initiative—Definition of Material (Amendments to IAS 1 and IAS 8)

Disclosure Initiative—Principles of Disclosure

Disclosure Initiative—Targeted Standards-level Review of Disclosures

IFRS Accounting Taxonomy Update—Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2

IFRS Accounting Taxonomy Update—Amendments to IFRS 16 and IAS 1

Joint Financial Statement Presentation (Replacement of IAS 1)

Non-current Liabilities with Covenants (Amendments to IAS 1)

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

Presentation of Liabilities or Assets Related to Uncertain Tax Treatments (IAS 1)

Presentation of interest revenue for particular financial instruments (IFRS 9 and IAS 1)

Puttable Financial Instruments and Obligations Arising on Liquidation (Amendments to IAS 32 and IAS 1)

Revised IAS 1 Presentation of Financial Statements: Phase A

Supply Chain Financing Arrangements—Reverse Factoring

Related IFRS Standards

Related ifric interpretations.

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

Unconsolidated amendments

Implementation support, your privacy.

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The IFRS Foundation is a not-for-profit, public interest organisation established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.

Our Standards are developed by our two standard-setting boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB). 

About the IFRS Foundation

Ifrs foundation governance, stay updated.

IFRS Accounting Standards are developed by the International Accounting Standards Board (IASB). The IASB is an independent standard-setting body within the IFRS Foundation.

IFRS Accounting Standards are, in effect, a global accounting language—companies in more than 140 jurisdictions are required to use them when reporting on their financial health. The IASB is supported by technical staff and a range of advisory bodies.

IFRS Accounting

Standards and frameworks, using the standards, project work, products and services.

IFRS Sustainability Disclosure Standards are developed by the International Sustainability Standards Board (ISSB). The ISSB is an independent standard-setting body within the IFRS Foundation.

IFRS Sustainability Standards are developed to enhance investor-company dialogue so that investors receive decision-useful, globally comparable sustainability-related disclosures that meet their information needs. The ISSB is supported by technical staff and a range of advisory bodies.

IFRS Sustainability

Education, membership and licensing.

IAS 1 Presentation of Financial Statements

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IAS 1 sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. It requires an entity to present a complete set of financial statements at least annually, with comparative amounts for the preceding year (including comparative amounts in the notes). A complete set of financial statements comprises:

• a statement of financial position as at the end of the period;
• a statement of profit and loss and other comprehensive income for the period.  Other comprehensive income is those items of income and expense that are not recognised in profit or loss in accordance with IFRS Standards.  IAS 1 allows an entity to present a single combined statement of profit and loss and other comprehensive income or two separate statements;
• a statement of changes in equity for the period;
• a statement of cash flows for the period;
• notes, comprising a summary of significant accounting policies and other explanatory information; and
• a statement of financial position as at the beginning of the preceding comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.

An entity whose financial statements comply with IFRS Standards must make an explicit and unreserved statement of such compliance in the notes. An entity must not describe financial statements as complying with IFRS Standards unless they comply with all the requirements of the Standards. The application of IFRS Standards, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. IAS 1 also deals with going concern issues, offsetting and changes in presentation or classification.

Standard history

In April 2001 the International Accounting Standards Board (IASB) adopted IAS 1 Presentation of Financial Statements , which had originally been issued by the International Accounting Standards Committee in September 1997. IAS 1 Presentation of Financial Statements replaced IAS 1 Disclosure of Accounting Policies (issued in 1975), IAS 5 Information to be Disclosed in Financial Statements (originally approved in 1977) and IAS 13 Presentation of Current Assets and Current Liabilities (approved in 1979).

In December 2003 the IASB issued a revised IAS 1 as part of its initial agenda of technical projects. The IASB issued an amended IAS 1 in September 2007, which included an amendment to the presentation of owner changes in equity and comprehensive income and a change in terminology in the titles of financial statements. In June 2011 the IASB amended IAS 1 to improve how items of other income comprehensive income should be presented.

In December 2014 IAS 1 was amended by Disclosure Initiative (Amendments to IAS 1), which addressed concerns expressed about some of the existing presentation and disclosure requirements in IAS 1 and ensured that entities are able to use judgement when applying those requirements. In addition, the amendments clarified the requirements in paragraph 82A of IAS 1.

In October 2018 the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8). This amendment clarified the definition of material and how it should be applied by (a) including in the definition guidance that until now has featured elsewhere in IFRS Standards; (b) improving the explanations accompanying the definition; and (c) ensuring that the definition of material is consistent across all IFRS Standards.

In February 2021 the IASB issued Disclosure of Accounting Policies which amended IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements . The amendment amended IAS 1 to replace the requirement for entities to disclose their significant accounting policies with the requirement to disclose their material accounting policy information.

In October 2022, the IASB issued  Non-current Liabilities with Covenants . The amendments improved the information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with covenants. The amendments also responded to stakeholders’ concerns about the classification of such a liability as current or non-current.

Other Standards have made minor consequential amendments to IAS 1. They include Improvement to IFRSs (issued April 2009), Improvement to IFRSs (issued May 2010), IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 12 Disclosures of Interests in Other Entities (issued May 2011), IFRS 13 Fair Value Measurement (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Annual Improvements to IFRSs 2009–2011 Cycle (issued May 2012), IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013), IFRS 15 Revenue from Contracts with Customers (issued May 2014), Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) (issued June 2014), IFRS 9 Financial Instruments (issued July 2014), IFRS 16 Leases (issued January 2016), Disclosure Initiative (Amendments to IAS 7) (issued January 2016), IFRS 17 Insurance Contracts (issued May 2017), Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018) and Amendments to IFRS 17 (issued June 2020).

Related active projects

IFRS Accounting Taxonomy Update—Primary Financial Statements

Related completed projects

Clarification of the Requirements for Comparative Information (Amendments to IAS 1)

Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

Definition of Accounting Estimates (Amendments to IAS 8)

Disclosure Initiative (Amendments to IAS 1)

Disclosure Initiative (Amendments to IAS 7)

Disclosure Initiative—Accounting Policies

Disclosure Initiative—Definition of Material (Amendments to IAS 1 and IAS 8)

Disclosure Initiative—Principles of Disclosure

Disclosure Initiative—Targeted Standards-level Review of Disclosures

IFRS Accounting Taxonomy Update—Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2

IFRS Accounting Taxonomy Update—Amendments to IFRS 16 and IAS 1

Joint Financial Statement Presentation (Replacement of IAS 1)

Non-current Liabilities with Covenants (Amendments to IAS 1)

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

Presentation of Liabilities or Assets Related to Uncertain Tax Treatments (IAS 1)

Presentation of interest revenue for particular financial instruments (IFRS 9 and IAS 1)

Puttable Financial Instruments and Obligations Arising on Liquidation (Amendments to IAS 32 and IAS 1)

Revised IAS 1 Presentation of Financial Statements: Phase A

Supply Chain Financing Arrangements—Reverse Factoring

Related IFRS Standards

Related ifric interpretations.

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

Unconsolidated amendments

Implementation support, your privacy.

IFRS Foundation cookies

We use cookies on ifrs.org to ensure the best user experience possible. For example, cookies allow us to manage registrations, meaning you can watch meetings and submit comment letters. Cookies that tell us how often certain content is accessed help us create better, more informative content for users.

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Some cookies are essential to the functioning of the site. Other cookies are optional. If you accept all cookies now you can always revisit your choice on our  privacy policy  page.

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Financial Statement Presentation: Structure and Requirements

Preparing financial statements that meet regulatory requirements can be an overwhelming task for many organizations.

This article provides a comprehensive guide to the key components, structure, and presentation standards for financial statements to ensure proper compliance and disclosure.

We will explore the five main financial statements, breakdown the required elements of each statement, review relevant accounting standards from GAAP and IFRS, and provide practical examples and templates to guide your financial statement preparation. By following the recommendations outlined here, you can create accurate, compliant financial statements tailored to your specific reporting needs.

Introduction to Financial Statement Presentation

Financial statements are formal reports that summarize a company's financial performance over a period of time. They communicate key information to internal and external stakeholders to facilitate decision-making. Proper financial statement presentation is vital for businesses to effectively convey their financial position.

This section will provide an overview of financial statement presentation, including its purpose, key components, and regulatory requirements. It will introduce the 5 main components of financial statements and discuss how proper presentation is vital for businesses.

Understanding the 5 Components of Financial Statements

Financial statements generally contain 5 key components:

• Income Statement - Reports revenue, expenses, and profit/loss over a period of time
• Balance Sheet - Snapshot of assets, liabilities, and equity on a certain date
• Cash Flow Statement - Depicts inflows and outflows of cash
• Statement of Stockholders' Equity - Shows changes in equity accounts
• Notes to Financial Statements - Additional disclosures and details

These 5 reports work together to provide a comprehensive view of a company's finances. Proper categorization and presentation of each component is necessary for stakeholders to accurately interpret performance.

Significance of Financial Statement Presentation

Financial statement presentation standards exist to:

• Communicate Performance - Well-structured reports allow readers to clearly see profitability, liquidity, leverage, etc.
• Meet Regulatory Requirements - Public companies must follow strict presentation rules.
• Facilitate Decision-Making - With organized information, internal and external decisions can be made effectively.

Following presentation guidelines ensures transparency and enables financial analysis.

Regulatory Framework: ASC 205 and IAS 1

In the US, the FASB's ASC 205 establishes presentation principles for financial statements. Similarly, the IASB's IAS 1 outlines international standards. These regulations dictate:

• Statement ordering and content
• Classification and aggregation
• Disclosures

Understanding the regulatory presentation framework is key for proper financial reporting.

Proper financial statement presentation acts as the foundation for communicating performance. By classifying information correctly and meeting presentation standards, businesses can clearly convey their financial position.

What are the requirements for fair presentation of financial statements?

Fair presentation of financial statements requires adherence to accounting standards and a faithful representation of the company's financial position. Some key requirements include:

Compliance with Applicable Accounting Standards

Financial statements must comply with the applicable accounting standards framework, such as:

• US GAAP - Generally Accepted Accounting Principles in the United States
• IFRS - International Financial Reporting Standards

This ensures standardized reporting across companies.

Faithful Representation

Financial statements should faithfully represent the economic reality of transactions and events. Information should be complete, neutral, and free from material error.

Understandability

Financial information should be presented clearly and concisely. Companies should provide adequate disclosures and explanation of accounting policies, estimates, and judgements.

Information in financial statements should be relevant to the decision-making needs of users. Only include information that is capable of making a difference in decisions.

Materiality

Companies must provide all material information - those that can reasonably influence users' decisions. Immaterial information can be excluded.

Comparability

Financial reporting should allow users to identify similarities and differences across reporting periods and between entities. Consistent presentation and reporting facilitates comparison.

Following accounting rules and standards, as well as providing relevant, faithful, and clear information is key to achieving fair presentation of financial statements.

How do you present financial statements in a presentation?

When presenting financial statements, it is important to focus on communicating the key information clearly and effectively to your audience. Here are some tips:

Keep it simple

Avoid using complex financial jargon and acronyms that may confuse your audience. Present key figures, trends, and takeaways in easy-to-understand language. Use examples if needed to illustrate your points.

Use visuals

Visual aids like charts, graphs, and tables can help reinforce numbers and make financial data more digestible. Choose clear, uncluttered designs over flashy graphics. Emphasize key metrics and trends.

Tell a story

Structure your presentation to take the audience on a logical journey. Explain the meaning behind the numbers, and how they relate to broader company strategy and performance. Draw connections between financial statements.

Tailor to your audience

Understand what financial information your audience cares about most, and focus on highlighting the relevant key performance indicators that align to their interests or concerns.

Practice effective delivery

Speak slowly and clearly. Maintain eye contact and gauge audience reaction. Be prepared to answer questions on the details behind your summary figures.

Following these tips can lead to financial presentations that clearly communicate meaning and impact.

How should financial statements be presented?

Financial statements should be presented in a clear, structured format that complies with accounting standards and principles.

General Presentation Guidelines

• Financial statements typically include a balance sheet, income statement, statement of cash flows, and statement of stockholders' equity. Notes and disclosures provide important details.
• Assets are generally presented from most liquid to least liquid, while liabilities are presented from short-term to long-term.
• Positive numbers indicate assets and revenues, while negative numbers signify liabilities, equity, expenses or losses.
• Subtotals and totals should be clearly labeled for each financial statement category or section to improve readability.

Disclosure Requirements

Certain disclosures are required by accounting standards like GAAP or IFRS in the footnotes and statement notes. These include:

Accounting policies used

Details on material asset, liability and equity accounts

Segment and geographical reporting

Commitments and contingencies

Disclosures should provide clarity on any aspects of the financial statements that may be unclear or require further explanation.

Following standard presentation guidelines and properly disclosing important details leads to higher quality, more transparent and understandable financial statements.

What are the requirements for financial statements?

Financial statements need to adhere to certain basic requirements to accurately reflect a company's financial position. These include:

Fair Presentation

Financial statements must fairly present the financial position, performance, and cash flows of an entity. This requires compliance with accounting standards as well as providing adequate disclosures and descriptions to give users an accurate picture of the company's finances.

Going Concern

Financial statements are prepared under the assumption that the entity will continue operating in the foreseeable future. If there are doubts about the company's ability to do so, appropriate disclosures must be made.

Accrual Basis

Financial statements are prepared using the accrual basis of accounting, meaning that economic events are recognized when they occur, not when cash is exchanged. This better matches revenues and expenses to the period in which they were incurred.

Materiality and Aggregation

Information is material if omitting or misstating it could influence decisions made by users of the financial statements. Immaterial items can be aggregated to avoid cluttering statements.

No Offsetting

Assets and liabilities, and income and expenses, cannot be offset against each other unless specifically permitted by the accounting standards. Offsetting obscures useful information.

In summary, financial statements must provide a fair, going concern view of the entity's finances on an accrual basis. They should include all material information without aggregation or offsetting. Most companies must prepare financial statements at least annually and include comparative info from prior periods. Consistency in presentation over time is also key.

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Structuring financial statements: a detailed look.

Financial statements are structured reports that summarize a company's financial position and performance over a period of time. The five main financial statements are:

Income Statement Breakdown

The income statement shows a company's revenues, expenses, and net income over a period of time, usually a quarter or year. Key components include:

• Revenue - Money earned from the company's operations, products, or services
• Cost of Goods Sold (COGS) - Direct expenses related to providing products/services
• Operating Expenses - Indirect expenses like marketing, R&D, administration
• Operating Income - Revenue minus COGS and operating expenses
• Other Income/Expenses - Taxes, interest earned/paid
• Net Income - The "bottom line" profit or loss after subtracting all expenses

The income statement shows whether a company made a profit or loss during the period.

Analyzing the Balance Sheet

The balance sheet is a snapshot of a company's financial position at a point in time. Key components include:

Assets - Resources owned by the company with economic value. Common asset types:

• Current Assets - Cash, accounts receivable, inventory
• Fixed Assets - Property, plants, equipment
• Intangible Assets - Patents, trademarks, goodwill

Liabilities - Debts and obligations owed by the company:

• Current Liabilities - Due within 12 months, e.g. accounts payable
• Long-Term Debt - Due after 12 months, e.g. bonds payable

Shareholders' Equity - Value that would be returned to shareholders if assets were liquidated and debts paid off. Includes:

• Paid-in Capital - Amounts invested by shareholders
• Retained Earnings - Company profits not paid out as dividends

The balance sheet shows the company's financial health and liquidity position.

Cash Flow Statement Categorization

The cash flow statement tracks the actual cash coming into and going out of the business. Cash flows are categorized into:

• Operating Activities - Core business operations, e.g. cash received from customers
• Investing Activities - Investments in capital expenditures, securities, etc.
• Financing Activities - Cash from financing sources like loans and equity issuances

Analyzing the sources and uses of cash flow indicates whether the company is generating enough cash to sustain itself.

Presentation of the Statement of Retained Earnings

The statement of retained earnings summarizes changes in retained earnings over a period. It starts with the prior period's retained earnings, adds net income earned during the current period, and subtracts any dividends paid to shareholders.

The ending retained earnings balance is shown on the balance sheet. Tracking changes helps assess how much of the company's profits are being reinvested vs. paid out to shareholders.

Components of the Statement of Shareholders' Equity

The statement of shareholders' equity summarizes changes in the equity accounts over a period. Key components include:

• Paid-in Capital - Additional investments by shareholders
• Treasury Stock - Company repurchases of outstanding shares
• Retained Earnings - Company profits not paid as dividends
• Accumulated Other Comprehensive Income - Certain income statement items

This statement reconciles the beginning and ending shareholders' equity balances on the balance sheet.

Financial Statement Presentation Standards and Requirements

Financial statement presentation is crucial for effectively communicating a company's financial position and performance to stakeholders. Companies must follow strict presentation standards and requirements outlined by accounting regulations like US GAAP and IFRS .

Adhering to US GAAP Financial Statements Format

The FASB Accounting Standards Codification (ASC) Topic 205 summarizes the core presentation requirements for US GAAP financial statements. Key elements include:

• Classifying the balance sheet into current and noncurrent assets and liabilities
• Presenting expenses by function or nature in the income statement
• Including a statement of cash flows and statement of changes in equity
• Disclosing relevant information in footnotes

Companies should reference ASC 205 and related regulations when preparing financials to ensure proper US GAAP format and disclosure.

Compliance with IFRS and IAS 1 Presentation Standards

International Financial Reporting Standards (IFRS) share similarities with US GAAP but have key differences in presentation under IAS 1 (PDF here). These include:

• Stricter requirements about items presented on the balance sheet and income statement
• Different classifications of expenses and equity
• More flexibility in formatting statements

It is critical for multinational companies to understand both US GAAP and IFRS presentation standards.

Navigating SEC Disclosure Requirements

Public companies in the US must also follow Securities and Exchange Commission (SEC) disclosure rules that impact financial statement presentation. Examples include:

• Segment reporting disclosures about products, services, and geographic areas
• Related party transaction footnotes
• Disclosures of risk factors and uncertainties

See PwC's guide for best practices on SEC disclosures.

Avoiding Common Financial Statement Presentation Pitfalls

Some common financial statement presentation mistakes include:

• Inconsistent classification of expenses across periods
• Netting accounts that should be presented gross
• Failing to properly disclose uncertainties or contingencies

Companies should reference EY's presentation guide and have external audits done to identify areas for improvement.

Exploring Disclosures and Supplementary Information

This section will examine common supplementary financial information and disclosures provided alongside or within financial statements, and their significance in providing a complete financial picture.

Detailing Accounting Policies and Disclosures

Financial statements must include significant accounting policies as a footnote, summarizing principles related to revenue recognition, depreciation methods, valuation of inventories, investments, etc. These disclosures ensure transparency on assumptions and estimates made in preparing the statements.

For example, a retail company may disclose:

• Revenue is recognized at the point of sale when goods are sold to customers.
• Inventory is valued using the FIFO method.
• Fixed assets are depreciated over useful lives of 3-10 years using the straight-line method.

Other vital disclosures provide details on litigation risks, contractual obligations, segment performance, related party transactions, pension plan assets and obligations, etc. These offer context for assessing the company's financial health.

Insights from Management's Discussion and Analysis (MD&A)

The MD&A section discusses the company's financial performance, changes in financial position, and outlook. It analyzes trends in liquidity, capital resources, operations, industry conditions, and other factors impacting the business.

For instance, the MD&A may attribute a revenue decline to specific economic or competitive challenges. Or it may link an increase in capital expenditures to investments in new production facilities. This qualitative perspective supplements the quantitative data in financial statements.

Financial Ratio Analysis and Benchmarks

Many companies include key financial ratios like return on equity, profit margin, asset turnover, debt-to-equity alongside industry benchmarks.

For example, an industrial manufacturer may compare its gross margin percentage, inventory turnover ratio, and days sales outstanding ratio to industry averages. This allows contextual assessment of financial performance.

Benchmarking also assists lenders and investors in comparing companies within an industry when making investment decisions.

Types of Disclosures in Financial Statements

Common disclosures in financial statements include:

• Contingencies: Litigation, environmental liabilities, warranties
• Related parties: Transactions with affiliated entities
• Risks: Interest rate, currency, credit risk exposures
• Subsequent events: Significant events occurring after fiscal yearend
• Uncertainties: Potential asset impairments, variability in estimates
• Segment details: Revenue, assets, profitability by product line or geography

Such disclosures increase transparency on uncertainties inherent in financial reporting and assumptions made by management. They provide vital perspective for financial statement users and must be presented appropriately as per accounting standards.

Practical Examples and Guides for Financial Statement Presentation

This section provides practical financial statement presentation examples and explores resources like the PwC and EY financial statement presentation guides.

Financial Statement Presentation Example

Here is an example of a basic financial statement presentation for a fictional company:

Income Statement

• Revenue: $100,000
• Cost of Goods Sold: $60,000
• Gross Profit: $40,000
• Operating Expenses: $20,000
• Operating Income: $20,000
• Interest Expense: $2,000
• Pretax Income: $18,000
• Income Tax: $5,000
• Net Income: $13,000

Balance Sheet

• Cash: $10,000
• Accounts Receivable: $5,000
• Inventory: $15,000
• Total Assets: $30,000
• Liabilities
• Accounts Payable: $4,000
• Total Liabilities: $4,000
• Shareholders' Equity
• Common Stock: $10,000
• Retained Earnings: $16,000
• Total Liabilities and Equity: $30,000

Cash Flow Statement

• Operating Activities
• Changes in Working Capital: $5,000
• Net Cash from Operations: $18,000
• Investing Activities
• Equipment Purchases: -$3,000
• Financing Activities
• Dividends Paid: -$5,000
• Change in Cash: $10,000

This illustrates the core components and layout of financial statements. Companies provide further disclosures and details in the footnotes.

Leveraging the PwC Financial Statement Presentation Guide PDF

The PwC financial statement presentation guide provides a comprehensive overview of financial statement presentation requirements under IFRS . Key aspects covered include:

• General presentation principles
• Statement of financial position structure
• Income statement layout and disclosures
• Standards for the statement of changes in equity
• Cash flow statement preparation

The guide serves as an authoritative reference for ensuring financial statements adhere to the latest standards and presentation best practices. Companies can leverage the guide when structuring their financial reports to improve quality, transparency, and compliance.

Utilizing the EY Financial Statement Presentation Guide

The EY financial statement presentation guide delivers insights into effectively presenting financial information to stakeholders. Areas covered include:

• Optimizing the balance sheet structure
• Enhancing the clarity of the income statement
• Improving cash flow statement usefulness through classification
• Making critical judgment calls on presentation
• Providing high quality disclosures

By consulting the guide, finance teams can apply EY's presentation best practices to their financial reporting processes. This helps improve the understandability and decision-usefulness of statements for investors and regulators.

Conclusion: Mastering Financial Statement Presentation

Proper financial statement presentation is critical for communicating accurate and transparent information to stakeholders. As discussed, key requirements per GAAP and IFRS standards include:

• Presenting comparative financial statements covering at least two reporting periods
• Clearly labeling each financial statement and its components
• Disclosing relevant information in the notes to assist in interpretation
• Following formatting and component ordering conventions

By mastering guidelines around statement structure, organizations build trust and enable sound decision-making. Key lessons for financial professionals include:

• Understand regulatory presentation standards based on jurisdiction
• Analyze comparative trends and performance over time
• Assess which disclosures are material to the reader
• Format statements consistently across periods
• Focus on transparency through clear communication

Meeting presentation requirements takes diligence, but pays dividends in stakeholder confidence. Financial leaders should continue honing their expertise in this critical discipline.

Related posts

• Interim Financial Reporting: GAAP Requirements
• A Closer Look at International Financial Reporting: A Comprehensive Review
• Delving into IFRS Standards: A Comprehensive Review
• A Comparative Review of Top Financial Reporting Tools

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infoDiagram visual slide examples, PowerPoint diagrams & icons , PPT tricks & guides

10 Slide Ideas for Financial Report Presentation

Last Updated on February 7, 2024 by Anastasia

Working on a company financial report, and want to make it different this time? Financial reviews full of data and analysis are typically difficult to be digested by non-financial audiences, and it can be challenging to communicate the meaning behind the figures. If you want to disclose your quarterly or annual numbers in a simple and understandable way to your key stakeholders, check our blog for examples and inspiration.

A financial report is a management tool used to communicate key financial information to both internal and external stakeholders by covering aspects of financial affairs with the help of KPIs, such as income statements, balance sheets, cash flow, or financial ratios analysis. See how to prepare structured and professional financial slides smoothly using PowerPoint tools.

All graphics examples presented below can be downloaded as an editable source. Explore the Financial Report and Performance Indicators Presentation for PowerPoint.

Get inspired by seven examples of how you can illustrate the components of your financial report and a quick instruction on how you can create a P&L Statement table using simple design tricks.

Visualize your key financial indicators

Such a general slide with a financial summary will help to analyze the big picture and ensure you’re on the same page with the audience.

You can list the common key indicators such as Global Net Revenue, Like for Like Growth, Cash Conversion Cycle, Profit Before Tax. A neutral background picture makes the slide more attractive and circles with highlights on the right help to stay focused on important numbers.

Show revenue and profit snapshot on one dashboard slide

This slide shows how you can summarize net sales and profitability evolution using gauges and a simple bar chart. The dashboard illustrates typical profitability measures: Net Sales, Operating Expenses, EBIDTA, and PBT as easy-to-read gauge charts. The profit growth over the years is shown as a clear bar chart.

Illustrate revenue highlights with clear charts

If you’d like to include additional data, for example, revenue highlights over time or regions, you can do it as on the slides above. The first one presents sales distribution breakdown by months and categories. The second slide example presents sales split by worldwide markets geographies on a world map as light background underlining the location of the markets.

Small elements, like pin icons, doughnut charts, and color-coding will help you add a professional look to your presentation.

Pro tip: To help non-financial people digest the data, keep your slides short, don’t stuff them with jargon words . Use illustrations, and make the most essential data points clearly visible.

Include balance sheet and cash flow tables

The very common problem is the unreadability of massive tables. The balance sheet and cash flow statement will be definitely complex, as you need to squeeze many numbers inside.

Notice how color-coding is used for various table sections, and illustrative symbols, which don’t steal attention from the content, rather nicely add up. A text box aside can be used for your comments or notes.

Compare key drivers of a revenue growth

To illustrate the comparison of several growth drivers, you can apply such stacked bars.

Notice how specific drivers (E-commerce, Emerging Markets, Organic Growth, New Product Lines) are illustrated by corresponding icon symbols, all in one consistent style.

Visualize revenue analysis for each quarter in your financial report

To present an analysis of sales revenue over the year, you can use such a bar chart. It’s slightly enhanced by adding quarter signs over the data chart.

This data chart illustrates revenue analysis split by quarters and channels. If you have some comments or notes you’d like to discuss, we advise putting the most essential point in bold.

Present your financial metrics and indicators as a dashboard grid

Want to go deeper and include the analysis of some ratios? A good idea is to firstly remind your audience what are those indicators and what exactly they show.

If you have more items to show on one slide, it’s good to organize them to some regular grid. Make sure all elements are aligned to make it look professional.

If you have more items to show on one slide, it’s good to organize them to some regular grid.

You can include general definitions and development of key financial ratios e.g. growth, profitability, liquidity, efficiency, solvency, and capital market ratios. On the slide example, you can see the capital market ratios KPI line chart which shows Dividend Yield and P/E Ratio change over the years.

Guide on how to redesign P&L Statement to a stylish table

Here’s a step-by-step guide on how you can create a P&L Statement table using simple shapes, icons, and a few tricks that will save you time.

1. Use simple PowerPoint shapes to create a stylish table design.

2. Adjust your source P&L table to be readable.

The trick is to have enough margin inside the table cell.

3. Enhance the table header

Add ribbon shapes as an additional header row to make the table look nicer.

4. Redesign the first column

You can add stylish arrows in a place of 1st table column.

5. Enrich your table with icons and a background picture.

See the whole instruction and other visual examples here: How to Create an Effective Company Financial Report Using PowerPoint.

Need to prepare a broader annual report and focus on business highlights? See how to create a comprehensive overview of activities using graphs, icons, infographic elements, and data-driven charts in this blog .

Resource: Financial Report and Performance Indicators Presentation

The graphics in this blog are a part of our financial report layouts collection. Our financial review deck incorporates 30 infographics slide templates for a financial summary overview, balance sheets with assets and liabilities, income statement, profit and loss reports, revenue and profit snapshot, cash flow statement, explain types of financial ratios, key growth drivers, or breakdown of your operational expenses.

You can reuse graphs and charts, and tailor them to your needs in order to make your slides clear and easy to understand. See the full deck here:

Financial Report and Performance Indicators PPT Presentation

Using concise, modern images will make your PowerPoint structured and consistent. To make your presentations even more appealing, consider also using this collection of professionally designed diagram layouts .

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The Beginner’s Guide to Reading & Understanding Financial Statements

• 10 Jun 2020

An ability to understand the financial health of a company is one of the most vital skills for aspiring investors, entrepreneurs, and managers to develop. Armed with this knowledge, investors can better identify promising opportunities while avoiding undue risk, and professionals of all levels can make more strategic business decisions.

Financial statements offer a window into the health of a company, which can be difficult to gauge using other means. While accountants and finance specialists are trained to read and understand these documents, many business professionals are not. The effect is an obfuscation of critical information.

If you’re new to the world of financial statements, this guide can help you read and understand the information contained in them.

Access your free e-book today.

Understanding Financial Statements

To understand a company’s financial position—both on its own and within its industry—you need to review and analyze several financial statements: balance sheets, income statements, cash flow statements, and annual reports. The value of these documents lies in the story they tell when reviewed together.

1. How to Read a Balance Sheet

A balance sheet conveys the “book value” of a company. It allows you to see what resources it has available and how they were financed as of a specific date. It shows its assets, liabilities, and owners’ equity (essentially, what it owes, owns, and the amount invested by shareholders).

The balance sheet also provides information that can be leveraged to compute rates of return and evaluate capital structure, using the accounting equation: Assets = Liabilities + Owners’ Equity.

Assets are anything a company owns with quantifiable value.

Liabilities refer to money a company owes to a debtor, such as outstanding payroll expenses, debt payments, rent and utility, bonds payable, and taxes.

Owners’ equity refers to the net worth of a company. It’s the amount of money that would be left if all assets were sold and all liabilities paid. This money belongs to the shareholders, who may be private owners or public investors.

Alone, the balance sheet doesn’t provide information on trends, which is why you need to examine other financial statements, including income and cash flow statements, to fully comprehend a company’s financial position.

This article will teach you more about how to read a balance sheet .

2. How to Read an Income Statement

An income statement , also known as a profit and loss (P&L) statement, summarizes the cumulative impact of revenue, gain, expense, and loss transactions for a given period. The document is often shared as part of quarterly and annual reports, and shows financial trends, business activities (revenue and expenses), and comparisons over set periods.

Income statements typically include the following information:

• Revenue: The amount of money a business takes in
• Expenses: The amount of money a business spends
• Costs of goods sold (COGS): The cost of component parts of what it takes to make whatever a business sells
• Gross profit: Total revenue less COGS
• Operating income: Gross profit less operating expenses
• Income before taxes: Operating income less non-operating expenses
• Net income: Income before taxes less taxes
• Earnings per share (EPS): Division of net income by the total number of outstanding shares
• Depreciation: The extent to which assets (for example, aging equipment) have lost value over time
• EBITDA: Earnings before interest, taxes, depreciation, and amortization

Accountants, investors, and other business professionals regularly review income statements:

• To understand how well their company is doing: Is it profitable? How much money is spent to produce a product? Is there cash to invest back into the business?
• To determine financial trends: When are costs highest? When are they lowest?

This article will teach you more about how to read an income statement .

Related: Financial Terminology: 20 Financial Terms to Know

3. How to Read a Cash Flow Statement

The purpose of a cash flow statement is to provide a detailed picture of what happened to a business’s cash during a specified duration of time, known as the accounting period. It demonstrates an organization’s ability to operate in the short and long term, based on how much cash is flowing into and out of it.

Cash flow statements are broken into three sections: Cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

Operating activities detail cash flow that’s generated once the company delivers its regular goods or services, and includes both revenue and expenses. Investing activity is cash flow from purchasing or selling assets—usually in the form of physical property, such as real estate or vehicles, and non-physical property, like patents—using free cash, not debt. Financing activities detail cash flow from both debt and equity financing.

It’s important to note there’s a difference between cash flow and profit . While cash flow refers to the cash that's flowing into and out of a company, profit refers to what remains after all of a company’s expenses have been deducted from its revenues. Both are important numbers to know.

With a cash flow statement, you can see the types of activities that generate cash and use that information to make financial decisions .

Ideally, cash from operating income should routinely exceed net income, because a positive cash flow speaks to a company’s financial stability and ability to grow its operations. However, having positive cash flow doesn’t necessarily mean a company is profitable, which is why you also need to analyze balance sheets and income statements.

This article will teach you more about how to read a cash flow statement .

4. How to Read an Annual Report

An annual report is a publication that public corporations are required to publish annually to shareholders to describe their operational and financial conditions.

Annual reports often incorporate editorial and storytelling in the form of images, infographics, and a letter from the CEO to describe corporate activities, benchmarks, and achievements. They provide investors, shareholders, and employees with greater insight into a company’s mission and goals, compared to individual financial statements.

Beyond the editorial, an annual report summarizes financial data and includes a company's income statement, balance sheet, and cash flow statement. It also provides industry insights, management’s discussion and analysis (MD&A), accounting policies, and additional investor information.

In addition to an annual report, the US Securities and Exchange Commission (SEC) requires public companies to produce a longer, more detailed 10-K report, which informs investors of a business’s financial status before they buy or sell shares.

10-K reports are organized per SEC guidelines and include full descriptions of a company’s fiscal activity, corporate agreements, risks, opportunities, current operations, executive compensation, and market activity. You can also find detailed discussions of operations for the year, and a full analysis of the industry and marketplace.

Both an annual and 10-K report can help you understand the financial health, status, and goals of a company. While the annual report offers something of a narrative element, including management’s vision for the company, the 10-K report reinforces and expands upon that narrative with more detail.

This article will teach you more about how to read an annual report .

A Critical Skill

Reviewing and understanding these financial documents can provide you with valuable insights about a company, including:

• Its debts and ability to repay them
• Profits and/or losses for a given quarter or year
• Whether profit has increased or decreased compared to similar past accounting periods
• The level of investment required to maintain or grow the business
• Operational expenses, especially compared to the revenue generated from those expenses

Accountants, investors, shareholders, and company leadership need to be keenly aware of the financial health of an organization, but employees can also benefit from understanding balance sheets, income statements, cash flow statements, and annual reports.

If you don’t have a financial background, the good news is that there are steps you can take to learn about finance and jumpstart your career . Building your financial literacy and skills doesn’t need to be difficult.

Are you interested in gaining a toolkit for making smarter financial decisions and communicating decisions to key stakeholders? Explore our online finance and accounting courses , and download our free course flowchart to determine which best aligns with your goals.

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What Are Financial Statements?

• Their Purpose

Balance Sheet

Income statement, cash flow statement, statement of changes in shareholder equity, statement of comprehensive income, nonprofit financial statements.

• Limitations

The Bottom Line

• Corporate Finance
• Financial statements: Balance, income, cash flow, and equity

Financial Statements: List of Types and How to Read Them

Financial statements are written records that convey the financial activities of a company. Financial statements are often audited by government agencies and accountants to ensure accuracy and for tax, financing, or investing purposes. For-profit primary financial statements include the balance sheet, income statement, statement of cash flow, and statement of changes in equity. Nonprofit entities use a similar but different set of financial statements.

Key Takeaways

• Financial statements provide interested parties with a company's overall financial condition and profitability.
• Statements required by Generally Accepted Accounting Principles are the balance sheet, the income statement, and the statement of cash flows, but you'll likely see more in reports.
• The balance sheet provides an overview of assets, liabilities, and shareholders' equity as a snapshot in time.
• The income statement primarily focuses on a company's revenues and expenses during a particular period. Once expenses are subtracted from revenues, the statement produces a company's profit figure called net income.
• The cash flow statement (CFS) tracks how a company uses its cash to pay its debt obligations and fund its operating expenses and investments.

Investopedia / Julie Bang

Understanding Financial Statements

Investors and financial analysts rely on financial data to analyze a company's performance and make predictions about the future direction of its stock price. One of the most important resources of reliable and audited financial data is the annual report , which contains the firm's financial statements.

The financial statements are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows.

Not all financial statements are created equally. The rules used by U.S. companies are called Generally Accepted Accounting Principles, while the rules often used by international companies are International Financial Reporting Standards (IFRS). In addition, U.S. government agencies use a different set of financial reporting rules.

The balance sheet provides an overview of a company's assets, liabilities, and shareholders' equity at a specific time and date. The date at the top of the balance sheet tells you when this snapshot was taken; this is generally the end of its annual reporting period. Below is a breakdown of the items in a balance sheet.

• Cash and cash equivalents  are liquid assets, which may include Treasury bills and certificates of deposit.
• Accounts receivable  are the amount of money owed to the company by its customers for the sale of its products and services.
• Inventory is the goods a company has on hand, intended to be sold as a course of business. Inventory may include finished goods, work in progress that is not yet finished, or raw materials on hand that have yet to be worked.
• Prepaid expenses are costs paid in advance of when they are due. These expenses are recorded as an asset because their value has not yet been recognized; should the benefit not be recognized, the company would theoretically be due a refund.
• Property, plant, and equipment are capital assets owned by a company for its long-term benefit. This includes buildings used for manufacturing or heavy machinery used for processing raw materials.
• Investments are assets held for speculative future growth. These aren't used in operations; they are simply held for capital appreciation.
• Trademarks, patents, goodwill, and other intangible assets can't physically be touched but have future economic (and often long-term benefits) for the company.

Liabilities

• Accounts payable are the bills due as part of a business's operations. This includes utility bills, rent invoices, and obligations to buy raw materials.
• Wages payable are payments due to staff for time worked.
• Notes payable are recorded debt instruments that record official debt agreements, including the payment schedule and amount.
• Dividends  payable are dividends that have been declared to be awarded to shareholders but have not yet been paid.
• Long-term debt can include a variety of obligations, including sinking bond funds, mortgages, or other loans that are due in their entirety in more than one year. Note that the short-term portion of this debt is recorded as a current liability.

Shareholders' Equity

• Shareholders' equity is a company's total assets minus its total liabilities.  Shareholders' equity (also known as stockholders' equity ) represents the amount of money that would be returned to shareholders if all of the assets were liquidated and all debts paid off.
• Retained earnings  are part of shareholders' equity and are the amount of net earnings that were not paid to shareholders as dividends.

Example of a Balance Sheet 

Below is a portion of ExxonMobil Corporation's  (XOM)  balance sheet for fiscal year 2021, reported as of Dec. 31, 2021.

• Total assets were $338.9 billion.
• Total liabilities were $163.2 billion.
• Total equity was $175.7 billion.
• Total liabilities and equity were $338.9 billion, which equals the total assets for the period.

Unlike the balance sheet, the income statement covers a range of time, which is a year for annual financial statements and a quarter for quarterly financial statements. The income statement provides an overview of revenues, expenses, net income, and earnings per share.

Operating revenue is the revenue earned by selling a company's products or services. The  operating revenue for an auto manufacturer would be realized through the production and sale of autos. Operating revenue is generated from the core business activities of a company.

Non-operating revenue is the income earned from non-core business activities. These revenues fall outside the primary function of the business. Some non-operating revenue examples include:

• Interest earned on cash in the bank
• Rental income from a property
• Income from strategic partnerships like royalty payment receipts
• Income from an advertisement display located on the company's property

Other income is the revenue earned from other activities. Other income could include gains from the sale of long-term assets such as land, vehicles, or a subsidiary.

Primary expenses are incurred during the process of earning revenue from the primary activity of the business. Expenses include the cost of goods sold (COGS), selling, general and administrative expenses (SG&A), depreciation or amortization, and research and development (R&D).

Typical expenses include employee wages, sales commissions, and utilities such as electricity and transportation.

Expenses that are linked to secondary activities include interest paid on loans or debt. Losses from the sale of an asset are also recorded as expenses.

The main purpose of the income statement is to convey details of profitability and the financial results of business activities; however, it can be very effective in showing whether sales or revenue is increasing when compared over multiple periods.

Investors can also see how well a company's management is controlling expenses to determine whether a company's efforts in reducing the cost of sales might boost profits over time.

Example of an Income Statement

Below is a portion of ExxonMobil Corporation's income statement for fiscal year 2021, reported as of Dec. 31, 2021.

• Total revenue was $276.7 billion.
• Total costs were $254.4 billion.
• Net income or profit was $23 billion.

The cash flow statement (CFS) shows how cash flows throughout a company. The cash flow statement complements the balance sheet and  income statement .

The CFS allows investors to understand how a company's operations are running, where its money is coming from, and how money is being spent. The CFS also provides insight as to whether a company is on a solid financial footing.

The cash flow statement contains three sections that report on the various activities for which a company uses its cash. Those three components of the CFS are listed below.

Operating Activities 

The operating activities on the CFS include any sources and uses of cash from running the business and selling its products or services. Cash from operations includes any changes made in cash accounts receivable, depreciation, inventory, and  accounts payable . These transactions also include wages, income tax payments, interest payments, rent, and cash receipts from the sale of a product or service.

Investing Activities

Investing activities include any sources and uses of cash from a company's investments in its long-term future. A purchase or sale of an asset, loans made to vendors or received from customers, or any payments related to a merger or acquisition are included in this category.

Also, purchases of fixed assets such as property, plant, and equipment (PPE) are included in this section. In short, changes in equipment, assets, or investments relate to cash from investing.

Financing Activities

Cash from financing activities includes the cash from investors or banks and the cash paid to shareholders. Financing activities include debt issuance, equity issuance, stock repurchases, loans, dividends paid, and debt repayments.

The cash flow statement reconciles the income statement with the balance sheet in three major business activities.

Example of a Cash Flow Statement

Below is a portion of ExxonMobil Corporation's cash flow statement for fiscal year 2021, reported as of Dec. 31, 2021. We can see the three areas of the cash flow statement and their results.

• Operating activities generated a positive cash flow of $48 billion.
• Investing activities generated cash outflows of -$10.2 billion for the period. Additions to property, plant, and equipment made up the majority of cash outflows, which means the company invested in new fixed assets.
• Financing activities generated cash outflows of -$35.4 billion for the period. Reductions in short-term debt and dividends paid out comprised most of the cash outflows.

The statement of changes in equity tracks total equity over time. This information ties back to a balance sheet for the same period; the ending balance on the change of equity statement equals the total equity reported on the balance sheet.

The formula for changes to shareholder equity will vary from company to company; in general, there are a couple of components:

• Beginning equity : This is the equity at the end of the last period that simply rolls to the start of the next period.
• (+) Net income : This is the amount of income the company earned in a given period. The proceeds from operations are automatically recognized as equity in the company, and this income is rolled into retained earnings at year-end.
• (-) Dividends : This is the amount of money that is paid out to shareholders from profits. Instead of keeping all of a company's profits, the company may choose to give some profits away to investors.
• (+/-) Other comprehensive income : This is the period-over-period change in other comprehensive income. Depending on transactions, this figure may be an addition or subtraction from equity.

In ExxonMobil's statement of changes in equity, the company also records activity for acquisitions, dispositions, amortization of stock-based awards, and other financial activities. This information is useful for analyzing how much money is being retained by the company for future growth as opposed to being distributed externally.

An often less utilized financial statement, the statement of comprehensive income summarizes standard net income while also incorporating changes in other comprehensive income (OCI). Other comprehensive income includes all unrealized gains and losses that are not reported on the income statement. This financial statement shows a company's total change in income, even gains and losses that have yet to be recorded in accordance with accounting rules.

Examples of transactions that are reported on the statement of comprehensive income include:

• Net income (from the statement of income)
• Unrealized gains or losses from debt securities
• Unrealized gains or losses from derivative instruments
• Unrealized translation adjustments due to foreign currency
• Unrealized gains or losses from retirement programs

In the example below, ExxonMobil has over $2 billion of net unrecognized income. Instead of reporting just $23.5 billion of net income, ExxonMobil reports nearly $26 billion of total income when considering other comprehensive income.

Nonprofit organizations record financial transactions across a similar set of financial statements. However, due to the differences between a for-profit entity and a purely philanthropic entity, there are differences in the financial statements used. The standard set of financial statements used for a nonprofit entity includes:

• Statement of Financial Position: This is the equivalent of a for-profit entity's balance sheet. The largest difference is nonprofit entities do not have equity positions; any residual balances after all assets have been liquidated and liabilities have been satisfied are called "net assets."
• Statement of Activities: This is the equivalent of a for-profit entity's statement of income. This report tracks the changes in operation over time, including the reporting of donations, grants, event revenue, and expenses to make everything happen.
• Statement of Functional Expenses: This is specific to nonprofit entities. The statement of functional expenses reports expenses by entity function (often broken into administrative, program, or fundraising expenses). This information is distributed to the public to explain what proportion of company-wide expenditures are related directly to the mission.
• Statement of Cash Flow: This is the equivalent of a for-profit entity's statement of cash flow. Though the accounts listed may vary due to the different nature of a nonprofit organization, the statement is still divided into operating, investing, and financing activities.

The purpose of an external auditor is to assess whether an entity's financial statements have been prepared following prevailing accounting rules and whether any material misstatements are impacting the validity of results.

Limitations of Financial Statements

Although financial statements provide a wealth of information on a company, they do have limitations. The statements are often interpreted differently, so investors often draw divergent conclusions about a company's financial performance.

For example, some investors might want stock repurchases , while others might prefer to see that money invested in long-term assets. A company's debt level might be fine for one investor, while another might have concerns about the level of debt for the company.

When analyzing financial statements , it's important to compare multiple periods to determine any trends and compare the company's results to its peers in the same industry.

Lastly, financial statements are only as reliable as the information fed into the reports. Too often, it's been documented that fraudulent financial activity or poor control oversight have led to misstated financial statements intended to mislead users. Even when analyzing audited financial statements, there is a level of trust that users must place in the validity of the report and the figures being shown.

What Are the Main Types of Financial Statements?

The three main types of financial statements are the balance sheet, the income statement, and the cash flow statement. These three statements together show the assets and liabilities of a business, its revenues, and costs, as well as its cash flows from operating, investing, and financing activities.

What Are the Benefits of Financial Statements?

Financial statements show how a business operates. It provides insight into how much and how a business generates revenues, what the cost of doing business is, how efficiently it manages its cash, and what its assets and liabilities are. Financial statements provide all the details on how well or poorly a company manages itself.

How Do You Read Financial Statements?

Financial statements are read in several different ways. First, financial statements can be compared to prior periods to understand changes over time better. Financial statements are also read by comparing the results to competitors or other industry participants. By comparing financial statements to other companies, analysts can get a better sense of which companies are performing the best and which are lagging behind the rest of the industry.

What Is GAAP?

Generally Accepted Accounting Principles (GAAP) are the rules by which publicly-owned United States companies must prepare their financial statements. It is the guideline that explains how to record transactions, when to recognize revenue, and when expenses must be recognized. International companies may use a similar but different set of rules called International Financial Reporting Standards (IFRS).

Financial statements are the ticket to the external evaluation of a company's financial performance. The balance sheet reports a company's financial health through its liquidity and solvency, while the income statement reports its profitability. A statement of cash flow ties these two together by tracking sources and uses of cash. Together, these financial statements attempt to provide a more clear picture of a business's financial standing.

U.S. Securities and Exchange Commission. " Exxon Mobile Corporation Form 10-K for the Fiscal Year Ended Dec. 31, 2021 ."

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• What Is Valuation? 2 of 37
• Valuation Analysis: Meaning, Examples and Use Cases 3 of 37
• Financial Statements: List of Types and How to Read Them 4 of 37
• Balance Sheet: Explanation, Components, and Examples 5 of 37
• Cash Flow Statement: How to Read and Understand It 6 of 37
• 6 Basic Financial Ratios and What They Reveal 7 of 37
• 5 Must-Have Metrics for Value Investors 8 of 37
• Earnings Per Share (EPS): What It Means and How to Calculate It 9 of 37
• P/E Ratio Definition: Price-to-Earnings Ratio Formula and Examples 10 of 37
• Price-to-Book (PB) Ratio: Meaning, Formula, and Example 11 of 37
• Price/Earnings-to-Growth (PEG) Ratio: What It Is and the Formula 12 of 37
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• Intrinsic Value of a Stock: What It Is and Formulas to Calculate It 16 of 37
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• Bottom-Up Investing: Definition, Example, Vs. Top-Down 25 of 37
• Financial Ratio Analysis: Definition, Types, Examples, and How to Use 26 of 37
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Home Blog PowerPoint Tutorials How To Create a PowerPoint Presentation of Financial Statements

How To Create a PowerPoint Presentation of Financial Statements

At SlideModel.com we receive several help requests from our users regarding Financial Analysis PowerPoint Presentations, mainly the presentation of Financial Statements data. We have previously wrote about this topic in our post  Financial Statement Templates For PowerPoint Presentations  with the objective to help users summarize relevant data and communicate the important conclusion extracted from the statements. The feedback was positive, but we are still requested to provide some guidelines on detailed statements. For this reason we will walk through our   Financial Statements PowerPoint Template  which provides comprehensive tables that provide higher level of detail. In order to have a higher visual impact and allow the message to engage the audience, the template also provides charts and ratios dashboards that will appeal to executive audiences.

• Financial data is complex
• Concepts are not intuitive
• The understanding and frame of references varies depending the audience.

This facts will drive your consolidated financial statements presentation plan.

The following sections will walk through financial statement presentation examples and will provide insights on how to tackle them.

Balance Sheet

The balance sheet by definition is a financial statement that summarizes an organization assets, liabilities and equity at a specific point of time (a snapshot). This three concepts provide information on what the organization owns, owes and how much was invested (capital).  Applying the facts we described before, Balance Sheet data is complex, so you will try to summarize the data in each section as much as possible, presenting the relevant accounting lines (generally, those associated with Liquidity , Debt and Net Worth ). The Concepts ( Assets , Liabilities and Equity ) are not simple, and when you dive into “liquidity of them”, it starts getting harder. The audience will drive your level of detail, so present a table where the major concepts are clearly highlighted (background colors), with totalizers (use bold for this lines and make sure you point them strongly). Move quickly to the Ratios section if understood, otherwise navigate to a second level of detail, if the audience requests to drill down.

As shown by the orange arrows in the image, the important concepts are highlighted. Again, what will remain in the audience mind is that “you can explain detail if requested”, “you can show the consolidated numbers” and that “you can move to the important topics derived in the relationships of Financial Statements”, the Ratios .

Income Statement

The Income Statement, also known as  “Statement of Incomes” , “Profit & Loss” or just “P&L”, is a financial statement that presents financial performance of an organization over a time period. How does it measures performance ? , summarizing how revenues occur and how expenses were incurred for all the organization activities (operational and non-operational). Also , shows the Net Profit (positive or negative) over the period.

This statement if divided into two sections, operational and non-operational. Operational items are directly related with the organizations core activities in Sales and Cost of Sale. Non Operational Items are expenses the company incurs for administrative , managerial or assets exchange activities.

Differently from the Balance Sheet, the Income Statement represents a period of time and not a snapshot.

When creating an Income Statement Presentation, take into account that what the audience is looking for is How the organization is performing?.  Generally, to show performance, you will need to compare against other period or a benchmark, for that reason each column is a “challenger” for the actual period column. Even though the absolute numbers are important you will need to communicate  the Trend concluded against the original and challengers statements. Highlight the Revenues and the Cost of Sales . Present them in an individual Slide as the “ Operational ” Section of the statement.

The second section of the Income Statement , is the Non-Operational Items, generally called “expenses”. This section shows how the organization management is using money for non operational activities. This section is important when the analysis is centered in improving efficiency. The amount of non-operational items can be huge, so its important you can consolidate into categories. Take your time to exercise this suggestion, otherwise the list will be too long, and will dis-encourage the audience. As a suggestion, keep in mind that this line items are industry dependent. Analyze some examples in your industry to come up with meaningful consolidated categories.

Statement Of Cash Flows

The Statement Of Cash Flows, by definition, is the financial statement that presents all the cash inflows and outflows derived of the operating, financing and investing activities of the organization in a period of time. This financial statement is created by 2 widely used methods, the direct and indirect methods. The main difference is that the direct method uses cashflow records to create the operational items while the indirect method uses  accrual accounting information to present the cash flows from the operations section, deriving them from the net income .Considering that the indirect method is the most popular, we included its table in the template.

This statement must communicate the cash flows through the organization activities and their accounting recognitions. The analysis generally will focus on the sustainability of the operational section, and how much investment and financing is required at the period to keep the business going. If contracts are being recognized as revenue in a period but money is not really reaching the organization, the statement of cashflows will spot this problem and will help managers to take actions over it. With the same reasoning, if net income allows higher cash flow bandwidth in operations, the organization could use fund for repaying debt and diminish the cost of financing.

The Statement of Cash Flows is divided in the three sections mentioned, Operational , Financing and Investing activities. In this template we created one slide for Operations and Finance, a second slide for Investing and a third slide with the subtotals of each activity, showing the total cash flows.

Presenting Trends

As we mentioned before, the important message that need to be presented with the financial statement  is the organizations performance. The best tools for communicating trends, are the charts. In this case the Financial Statements PowerPoint Template Provides three editable examples. We will show how the presenter can edit the charts and present meaningful information derived from the statements.

Income and Expenses Barchart

When reviewing the Income Statement , we explained the importance of the Operational Data versus Non-Operational . The Income and Expenses Chart visually communicate the relationship between this activities and allows the audience to review the trend or evolution, period versus period. This is ideal for spoting efficiency opportunities. The chart has two veritcal axis. The left (or main) axis represents the Operational Income and Net Income. The right axis (or secondary Axis) represents the Sales, Cost of Sales and Expenses. Remember the simple algebra that relates this value:

• Operational Income = Sales – Cost of Sales
• Net Income = Sales – Cost of Sales – Expenses

This example shows that the Net Income increases with time at a higher rate than the operational income. This can be interpreted as that sales improved, and expenses were kept almost similar. This kind of information is the message the presenter need to communicate, and the use of chart will boost the audience retention of the idea.

The chart is created as a PowerPoint chart, so the user will be able to edit it though the “ Edit Data ” Option of the “ Chart Tools > Design ” menu.

Income and Expenses Pie Chart

The other Chart Tool included in the Financial Statement PowerPoint Template is the Discrimination in Revenues and Expenses. This Charts help to transmit the message of revenues streams and expenses items. Ideal to communicate which are the business lines that bring higher revenues to the organization and which are the items were most of the money is being spent. Again, this chart will allow to spot efficiency problems, prioritize business units or cut costs.

Operating Income & Margin

One of the most extensively used key performance indicators in financial statement is the Operating Margin. This indicator derived from the operating revenues and operating costs allows to compare efficiency on the performance of the value proposition delivery. The trends over the operating margin can show problems in costs or problems on value proposition delivery that derive in a lower return. Again, in the sake of providing comparable features, the chart presented uses two vertical axis (primary and secondary). The primary axis (left) represents the Operating Income. The secondary axis (right) represents the Operating Margin. The chart is Data Driven, and editable through Excel.

Financial Statement Ratios

In this section we will show the most popular ratios used in conjunction with the Financial Statements. Following the initial note idea, the aim of the financial statements presentation should not be to repeat numbers and lists, but to communicate conclusions of the information hidden behind them . With this objective in mind is that executives decided to move into ratio analysis instead of financial statements analysis, basically because a summarized indicator ( KPI ) that relates specific data, provides enough information for decision making process, without the need of extensive analysis.

Liquidity Ratios

The liquidity ratios,by definition, are key performance indicators of the organization  to determine  it’s ability to pay off its short-terms debts obligations. They are created with information derived from the Balance Sheet (so they represent a snapshot). In the Financial Statement PowerPoint Template we created gauges indicators with categories from Best to Worse. The presentar can edit and manipulate this shapes as the are 100% fully editable . The indicators selected are:

• Current Ratio : also known as Working Capital Position.
• Quick Ratio : also known as Acid Test Ratio
• Net Working Capital Ratio

Profitability Ratios

Organizations Financial Performance can be interpreted from different angles, some times, growth is more importante than being “more” profitable, but almost all the times executives need to compare profitability between periods, to understand the impact of strategic decisions over the amount of money left for the organization and stakeholders.

For this ratios we prepared an alternative Gauge design,  modern and without classification over the values.

The ratios presented are:

• Return on Assets (ROA)
• Return on Equity (ROE)
• Profit Margin

Capital Structure Ratios

The Capital Structure  is how an organization finances its overall operations and growth by using different sources of funds. The Ratios on this sections allows the presenter to communicate this relationships. In this case instead of gauge like indicators, we used Editable Donut Charts.

• Assets Turnover Ratio
• Accounts Receivable Turnover Ratio
• Inventories Turnover Ratio

Debt Equity Ratios

The debt equity ratios show how the organization uses debt and equity to finace assets and operations.

• Debt to Equity Ratio
• Interest Coverage Ratio

Creating Consolidated Financial Statements PowerPoint Presentations can be a tough job. The presenter needs to evaluate the complexity of the data, the depth to be shown and the audience that will assist the presentation. Tools like charts and dashboard will help the presenter to summarize relevant information and communicate quicker, the important facts. The use of Financial Ratios is fundamental for a successful message.

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Revenue vs. Profit: An In-Depth Comparison

When a business earns revenue from selling its products or services to customers, that doesn’t mean it earns a profit. Revenue is what customers pay a company and is relatively easy to calculate. On the other hand, profit comes in three different forms and is what a business earns after it has paid for certain types of expenses.

Both revenue and profit are important to monitor and manage as they provide different facts about your business and its performance. Many refer to revenue as the “top line” and net profit as the “bottom line.” As you’ll see, this terminology corresponds to where revenue and net profit reside in an income statement.

Understanding the Top Line

A company’s income statement captures a business's performance over a week, month, quarter, or year. It includes what the company earns via sales and the indirect and direct costs it incurred to support the business.

When business people refer to the “top line,” they are talking about revenue, the first line item in an income statement. Growing the top line means increasing revenue.

Maintaining or growing your company’s total revenue is critical to long-term financial performance and stability. By increasing revenue, companies increase their ability to earn a profit. An aggressive marketing campaign, innovative pricing strategies, and entry into new markets can boost revenue. Yet, pursuing top-line growth is just one side of the financial equation.

Analyzing Profit from Different Perspectives

Adding dollars to revenue will only increase profits if the costs remain below revenue. Therefore, how companies manage their costs determines whether a business will earn a profit or generate a loss. So, in addition to monitoring revenue, business owners should also pay close attention to their costs and their impact on profits.

There are three ways to measure profits: gross profit, operating profit, and net profit. Gross profit is the revenue from sales less the cost of goods sold. Operating profit is calculated by subtracting operating expenses from gross profit. Net profit is what the company keeps after all its expenses, including operating costs, interest, taxes, and other non-operating expenses, are subtracted from total revenue. Since net profit is the last line item in an income statement, many refer to it as the bottom line. Since net profit accounts for all forms of expense, it is the financial measure that investors, banks, and other stakeholders often focus on. However, gross and operating profits are just as important to monitor as they provide insights into different aspects of the business. 

Financial statement users calculate gross, operating, and net profit margins to identify trends and facilitate comparisons between similar businesses. This involves calculating gross, operating, and net profit, dividing them by total revenue, and then converting them into percentages.

Revenue and Profit: Both Tell a Story

Revenue and profit each indicate a company’s financial health and operational performance. While revenue indicates the demand for a company’s products and services, net profit offers deeper insight into how the business manages its indirect and direct expenses. 

Gross and operating profit are also important metrics as they can highlight changes and trends in fixed, variable, direct, and indirect costs that impact your company’s profitability.

Together, revenue and net profit provide stakeholders with the data to make informed decisions about a company’s financial health, competitive positioning, and overall financial performance.

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IFRS 18 – Presentation and Disclosure in the Financial Statements

IFRS Advisory

Financial Reporting

Corporate Finance

Sarah Krammer

Tax advisor | Senior manager

Marina Mittermaier

Niklas Podhraski

Georg Seifridsberger

Tax advisor | Manager

April 9, 2024

Reading Time: 10  

On 9 April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements . IFRS 18 replaces IAS 1 Presentation of Financial Statements . Entities shall apply this Standard for annual reporting periods beginning on or after 1 January 2027. Earlier application is permitted. Companies applying IFRS as adopted by the European Union shall have to wait for the endorsement of IFRS. Initial application shall be retrospective, meaning that comparative periods are to be adjusted to the new standard. Further information on IFRS 18 can be found on the website of the IFRS Foundation. Further information on IFRS 18 can be found on the website of the IFRS Foundation .

IFRS 18 contains three key points:

•  Categories and subtotals: Classification of income and expenses into the operating, investing, and financing categories and introduction of the new subtotals operating profit and profit before financing and income taxes .
• Management-defined performance measures: Disclosure of performance measures that are not defined in IFRS – in particular, a reconciliation between the management-defined performance measure and the most directly comparable subtotal defined in IFRS.
• Aggregation and Disaggregation: Enhanced requirements for the grouping of information.

Table of Contents

Categories and subtotals.

Previously, there were no regulations regarding categories and subtotals for the statement of profit or loss. Categories are groups of consecutive items in the financial statements that are followed by a subtotal. Previously, subtotals like operating profit or financial result were in use, but they were neither defined in IFRS nor mandatory. The presentation of certain items, such as the share of profit of equity-accounted investees, was not regulated at all. This led to a lack of comparability between the financial statements of different companies.

IFRS 18 addresses this situation by requiring the classification of income and expenses into the categories operating, investing, and financing, and defining new subtotals for the statement of profit or loss.

Investing category

The investing category includes income and expenses from assets that are not related to a company’s main business activity, such as rental income and remeasurements of investment properties, interest income and fair-value changes of financial assets, or dividends and fair-value changes of equity instruments. Additionally, income and expenses from subsidiaries, associates, and joint ventures, as well as from cash and cash equivalents (if not related to the main business activity), shall be presented in the investing category. The investing category is followed by the subtotal profit before financing and taxes .

Operating category

The operating category includes income and expenses that are not classified in other categories and arise from a company’s operations including from its main business activities. Volatile and unusual income and expenses are also included in the operating category. The operating category is followed by the subtotal operating profit .

Financing category

Illustrative statements of profit or loss.

The statement of profit or loss according to the nature-of-expense method is presented as follows:

The statement of profit or loss according to the function-of-expense method is presented as follows:

Foreign exchange differences

Foreign exchange differences are classified in the same category as the income or expenses from which the differences arise. For example, foreign exchange differences arising from trade receivables are classified into the operating category. A general corporate company classifies foreign exchange differences from cash and cash equivalents into the investing category. Foreign exchange differences arising from debt issued in foreign currency are classified into the financing category.

Other applications

Furthermore, IFRS 18 provides specific rules for the classification of income and expenses from derivatives and designated hedging instruments, hybrid contracts, as well as cash and cash equivalents.

Entities with specified main business activities

The operating category includes income and expenses from an entity’s main business activity. According to IFRS 18, an entity shall assess whether it has a specified main business activity that involves investing in assets that generate a return independently, or whether it provides financing to customers.

Investing in assets

Entities investing in assets as their main business activity, such as real estate companies holding and renting properties, classify income from assets that generate independent returns into the operating category. Income from investments not accounted for using the equity method are also classified into the operating category.

Income and expenses from investments accounted for using the equity method are classified into the investing category, regardless of the main business activity. Before IFRS 18, the inclusion in (non-IFRS) subtotals of the share of profit of equity-accounted investees was not regulated which led to diversity in practise. Now, the share of profit of equity-accounted investees is not included in operating profit but it is included in profit before financing and taxes.

Financing to customers

Entities whose main business activity is providing financing to customers shall classify income and expenses from financing in the operating category. Typical examples of an entity providing financing are a bank, a lessor in a finance lease or any other financing provider.

Banking consists in providing loans and raising funds (deposits). Loans generate interest income and deposits incur interest expenses. Both interest income and interest expenses from financing activities are classified into the operating category of the statement of profit or loss. The profit-or-loss format of banks typically starts with interest revenue, interest expense, and is followed by the subtotal net interest income.

If an entity has an additional main business activity besides financing, it has the option to classify the entire interest result (from all business activities) into the operating category or only the part attributable to the financing activities. In that case, the remaining interest result is classified into the financing category.

Management-defined performance measures

Companies use a variety of performance measures not specified by IFRS Accounting Standards in communications with investors, such as EBIT or EBITDA. These measures are referred to as management-defined performance measures or MPMs.

Definition of management-defined performance measures

Management-defined performance measures are subtotals of income and expenses not specified by IFRS Accounting Standards and used in external communication outside the financial statements, representing management’s view of an aspect of the entity’s financial performance.

IFRS 18 requires a minimum presentation of items and subtotals in the statement of profit or loss. A company must disclose additional subtotals (including management-defined performance measures) in the statement of profit or loss if they contribute to an understanding of the company’s financial performance.

IFRS subtotals

The following subtotals in the statement of profit or loss are specified by IFRS Accounting Standards and are hereafter called “IFRS subtotals”. The following IFRS subtotals are not MPMs:

• Gross profit (function-of-expense method) and similar subtotals (e.g., net interest income)
• Operating profit before depreciation, amortisation, and impairments (see below)
• Operating profit (see above)
• Profit before financing and income tax (see above)
• Profit before tax
• Profit from continuing operations

Operating profit before depreciation, amortisation, and impairments (OPDAI)

When developing IFRS 18, the IASB considered including EBITDA as an IFRS subtotal. However, due to diversity in practice, the IASB decided against adopting EBITDA. Instead, the IASB created a new subtotal operating profit before depreciation, amortisation, and impairments (OPDAI). kreiert.

OPDAI is not a required subtotal in the statement of profit or loss but may be used optionally as a subtotal in the statement of profit or loss. OPDAI is not a management-defined performance measure and therefore not subject to the requirements of reconciliation to IFRS subtotals (see below).

Disclosures

For each management-defined performance measure (MPM), an entity shall disclose:

• A reconciliation between the MPM and the most directly comparable IFRS subtotal, including the effects on taxes and non-controlling interests.
• A description of the aspect of financial performance that is communicated by the MPM.
• An explanation of why the MPM provides useful information about the entity’s financial performance and how it is calculated.
• An explanation and justification of any changes to MPMs.

Reconciliation to the most comparable subtotal

For each MPM, an entity must provide a reconciliation between the MPM and the most directly comparable IFRS subtotal. For each line in the reconciliation, the income tax effect and the effect on non-controlling interests shall be disclosed.

A special case arises when the most directly comparable IFRS subtotal is operating profit before depreciation, amortisation, and impairments (OPDAI). If an entity does not use OPDAI as a subtotal in the statement of profit or loss, the reconciliation from MPM to OPDAI must be provided with the tax effect and effect on non-controlling interests. Subsequently, a further reconciliation from OPDAI to operating profit shall be provided, however, without effects on taxes and non-controlling interests. If OPDAI is presented in the statement of profit or loss, the reconciliation ends there.

Illustrative reconciliation of MPMs

An illustrative reconciliation may be disclosed as follows:

Aggregation and disaggregation

Investors had concerns that some companies don’t provide enough detailed information or that important information is obscured. IFRS 18 addresses these concerns by introducing enhanced requirements for the grouping of information and guidance on whether information should be in the primary financial statements or in the notes.

Objective of financial statements and the roles of the primary financial statements and the notes

IFRS 18.9 describes the objective of financial statements as to provide financial information about a reporting entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the prospects for future net cash inflows to the entity and in assessing management’s stewardship of the entity’s economic resources.

The role of the primary financial statements is to provide structured summaries of a reporting entity’s recognised assets, liabilities, equity, income, expenses and cash flows, that are useful to users of financial statements for obtaining an understandable overview, making comparisons between entities and identifying items or areas about which users of financial statements may wish to seek additional information in the notes (IFRS 18.16).

The role of the notes is to provide material information necessary to enable users of financial statements to understand the line items presented in the primary financial statements and to supplement the primary financial statements with additional information to achieve the objective of financial statements (IFRS 18.17).

In accordance with IFRS 18.41, an item is an asset, liability, equity instrument or reserve, income, expense or cash flow or any aggregation or disaggregation of such elements. A line item is an item that is presented separately in the primary financial statements. Other material information about items is disclosed in the notes. An entity shall:

• classify and aggregate assets, liabilities, equity, income, expenses or cash flows into items based on shared characteristics,
• disaggregate items based on characteristics that are not shared,
• aggregate or disaggregate items to present line items in the primary financial statements that fulfil the role of the primary financial statements in providing useful structured summaries,
• aggregate or disaggregate items to disclose information in the notes that fulfils the role of the notes in providing material information and
• ensure that aggregation and disaggregation in the financial statements do not obscure material information.

In accordance with IFRS 18.B17, to apply the above requirements, an entity shall:

• identify the assets, liabilities, equity, income, expenses and cash flows that arise from individual transactions,
• classify and aggregate assets, liabilities, equity, income, expenses and cash flows into items based on their characteristics (for example, their nature, their function, their measurement basis or another characteristic) so as to result in the presentation in the primary financial statements of line items and disclosure in the notes of items that have at least one similar characteristic and
• disaggregate items based on dissimilar characteristics in the primary financial statements, as necessary to provide useful structured summaries and in the notes, as necessary to provide material information.

Due to the objective of the financial statements, to provide structured and comparable summaries, the formation of line items may result in essential elements having dissimilar characteristics. Therefore, these elements must be disaggregated in the notes.

For example, a company may hold debt instruments and equity instruments, each measured at fair-value through profit or loss. The company concludes that the item “financial assets measured at fair-value through profit or loss” provides a useful summary for the user. However, debt and equity instruments are subject to different risks, necessitating a description of the item in the notes. Alternatively, the company could create two items debt instruments and equity instruments, which may need further disaggregation. Ultimately, it depends on the circumstances. A company exercises judgement in how it forms its items and the level of detail in which it disaggregates further information in the notes.

A company may aggregate immaterial elements with dissimilar characteristics into an item labelled “other”. As the label “other” is not informative, additional disclosures are required if aggregated amounts of immaterial items are sufficiently large, stating that the item consists of various immaterial, unrelated elements, and mentioning the type and amount of the largest element.

Description of line items

The following guidance applies to the description of line items:

Statement of cash flows

IFRS 18 clarifies that the statement of cash flows starts with operating profit or loss. Previously, there was no clearly regulated starting point for operating cash flows using the indirect method.

IFRS 18 has removed the previous options for companies without a specified main business activity to disclose interest and dividends paid and received in the operating, investing, or financing cash flows. Entities with a specified main business activity, however, classify interest received, interest paid, and dividends received each in a single category (either operating, investing or financing activities).

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SAP Announces Q1 2024 Results

WALLDORF — SAP SE today announced its financial results for the first quarter ended March 31, 2024.

• Cloud revenue up 24% and up 25% at constant currencies, supported by 32% Cloud ERP Suite revenue growth at constant currencies
• Current cloud backlog of €14.2 billion, up 27% and up 28% at constant currencies
• IFRS cloud gross profit up 27%, non-IFRS cloud gross profit up 27% and up 28% at constant currencies
• IFRS operating loss of –€0.8 billion due to a €2.2 billion restructuring provision
• Non-IFRS operating profit up 16% and up 19% at constant currencies even including higher share-based compensation resulting from strong share price increase
• Outlook 2024 reaffirmed

“We’re off to a great start in 2024 and we’re confident we’ll achieve our goals for the year. Looking ahead, we have powerful growth drivers in place – Business AI, cross-selling across our cloud portfolio, and winning new customers particularly in the midmarket. The strength of our current cloud backlog reaching a record growth rate is a testament to that momentum. Our transformation program is also well on track and will help us to capture this growth and increase efficiency.” Christian Klein, CEO

“In the first quarter we successfully kicked off the implementation of our transformation program thereby allowing us to focus our investments on the Business AI opportunity while decoupling expense from revenue growth. We are also very pleased by the unabated growth momentum of the Cloud ERP Suite, reflecting the market’s secular shift towards integrated cloud solutions.” Dominik Asam, CFO

Read the Quarterly Statement

Press Contacts: Joellen Perry, +1 (650) 445-6780, [email protected] , PT Daniel Reinhardt, +49 (6227) 7-40201, [email protected] , CET

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SAP Releases Integrated Report 2023 and Files Annual Report 2023 on Form 20-F with the U.S. Securities and Exchange Commission