Types of Financial Statements | FASB・SEC Official Information

Title: Understanding the Types of Financial Statements in the USA

1. Overview Financial statements are formal records that present the financial activities and condition of a business, individual, or other entity. In the United States, they are the cornerstone of financial reporting and are essential for transparent communication between a company and its stakeholders, including investors, creditors, regulators, and management. Prepared according to standardized frameworks—primarily Generally Accepted Accounting Principles (GAAP) or, for some companies, International Financial Reporting Standards (IFRS)—these statements provide a structured and reliable way to assess an entity's financial performance, position, and cash flows over a specific period. Their importance cannot be overstated, as they are critical for investment decisions, credit analysis, strategic planning, and regulatory compliance.

2. Applicable Objects & Scenarios The preparation and use of financial statements apply to a wide range of entities and scenarios:

Publicly Traded Companies: Required by the U.S. Securities and Exchange Commission (SEC) to file periodic reports (e.g., 10-K, 10-Q) containing audited financial statements.
Private Companies: While not always required to publicly disclose statements, they are essential for securing loans from banks, attracting private investors, and managing internal finances.
Non-Profit Organizations: Required to prepare statements for donors, grant-making institutions, and regulatory bodies to demonstrate stewardship of funds.
Government Entities: Follow Governmental Accounting Standards Board (GASB) guidelines for public accountability.
Scenarios: Needed during annual reporting cycles, when applying for financing, during mergers and acquisitions, for tax preparation, and for internal performance review by management.

3. Core Conclusions

The four primary financial statements serve distinct but interconnected purposes, forming a complete picture of financial health.
Adherence to established accounting standards (GAAP/IFRS) is mandatory for credibility, comparability, and regulatory acceptance.
The statements are fundamentally linked; numbers flow from one statement to another.
Professional judgment and accounting policies significantly impact how transactions are presented within these statements.
Users must analyze all statements together, not in isolation, for sound decision-making.

4. Procedures & Steps The preparation of financial statements is a rigorous, multi-step accounting cycle.

Step 1: Preparation This involves gathering and processing all financial data.

Identify and Record Transactions: Document all business events in the general journal.
Post to Ledger: Transfer journal entries to the general ledger accounts.
Prepare Unadjusted Trial Balance: List all ledger account balances to ensure total debits equal total credits.
Record Adjusting Entries: Make entries for accruals, deferrals, depreciation, and other period-end adjustments to comply with the revenue recognition and matching principles.
Prepare Adjusted Trial Balance: Create a new trial balance after adjustments.
Generate the Statements: Using the adjusted trial balance, draft the core financial statements in the following logical order:
- Income Statement: Calculates net income (Revenue - Expenses).
- Statement of Retained Earnings: Starts with beginning retained earnings, adds net income (from the Income Statement), and subtracts dividends to arrive at ending retained earnings.
- Balance Sheet: Uses ending retained earnings (from the Statement of Retained Earnings) and reports Assets = Liabilities + Equity.
- Statement of Cash Flows: Reconciles net income to cash from operations and details cash from investing and financing activities, explaining the change in the cash balance on the Balance Sheet.

Step 2: Application & Submission

For public companies, the completed and audited statements are incorporated into required SEC filings (e.g., the annual 10-K report).
Private companies submit statements to banks, investors, or other specified parties as required by contract or loan covenant.
Statements are shared with shareholders, typically as part of the annual report.

Step 3: Review & Confirmation

Internal Review: Management reviews the statements for accuracy and reasonableness.
External Audit (if required): An independent Certified Public Accountant (CPA) firm audits the statements, providing an opinion on whether they are presented fairly in accordance with GAAP.
Audit Committee & Board Approval: The company's audit committee and board of directors review and approve the final statements before issuance.
Public Filing/Release: The statements are filed with the SEC (for public companies) or distributed to stakeholders.

5. Frequently Asked Questions (FAQ)

Q: What are the four main financial statements? A: The Balance Sheet (Statement of Financial Position), the Income Statement (Statement of Operations), the Statement of Cash Flows, and the Statement of Shareholders' Equity (often combined with a Statement of Retained Earnings).
Q: What is the difference between the Income Statement and the Balance Sheet? A: The Income Statement shows performance over a period of time (e.g., a quarter or year). The Balance Sheet shows the financial position at a specific point in time (e.g., December 31).
Q: Why is the Statement of Cash Flows important if I have the Income Statement? A: The Income Statement is based on accrual accounting (revenues earned/expenses incurred), not actual cash. A company can be profitable on paper but run out of cash. The Statement of Cash Flows shows the actual cash generated and used.
Q: Who sets the accounting rules for U.S. financial statements? A: The Financial Accounting Standards Board (FASB) establishes GAAP for private and public companies. The SEC has statutory authority to set standards for public companies and recognizes FASB's standards.
Q: Are notes to the financial statements important? A: Absolutely. The notes are an integral part of the statements. They provide critical details on accounting policies, commitments, contingencies, breakdowns of line items, and other information essential for a full understanding.
Q: What is the relationship between these statements? A: They are deeply interconnected. Net income from the Income Statement flows into the Statement of Retained Earnings. Ending Retained Earnings is a key component of Equity on the Balance Sheet. The Statement of Cash Flows explains the change in the Cash balance shown on the Balance Sheet.

6. Risks & Compliance

Disclaimer: This article is for informational purposes only and does not constitute professional accounting, audit, or legal advice. Financial statement preparation is complex and requires expertise.
Compliance Risk: Failure to prepare statements in accordance with GAAP can result in legal liability, loss of investor confidence, SEC sanctions (for public companies), and loan defaults.
Fraud Risk: Intentional misstatement of financials constitutes fraud. Strong internal controls and independent audits are crucial mitigants.
Interpretation Risk: Users must understand the underlying assumptions and accounting policies to avoid misinterpretation of the numbers.
Reliance on Estimates: Statements involve management estimates (e.g., asset useful lives, allowance for doubtful accounts), which carry inherent uncertainty.

7. References & Sources

Financial Accounting Standards Board (FASB): The primary source for U.S. GAAP standards.
- Website: https://www.fasb.org/
U.S. Securities and Exchange Commission (SEC): Regulator for public company financial reporting.
- Website: https://www.sec.gov/
- EDGAR Database for Company Filings: https://www.sec.gov/edgar.shtml
American Institute of CPAs (AICPA): Professional organization for CPAs; provides resources on auditing and accounting.
- Website: https://www.aicpa.org/
Public Company Accounting Oversight Board (PCAOB): Sets auditing standards for public company audits.
- Website: https://pcaobus.org/

8. Related Topics

Generally Accepted Accounting Principles (GAAP)
SEC Filing Requirements (10-K, 10-Q, 8-K)
Financial Statement Analysis (Ratios, Trends)
Internal Controls over Financial Reporting (ICFR)
The Role of the External Auditor
Revenue Recognition Principles
International Financial Reporting Standards (IFRS)