Topic 5:

The annual accounts

AnaMAriasAlvarez

UniversityofOviedo
DepartmentofAccounting
amarias@uniovi.es

SchoolofBusinessAdministration
Course:FinancialStatementAnalysisandManagementControl
BachelorsDegreeinEconomics

AnaMAriasAlvarez (University ofOviedo) The annual accounts OpenCourseWare

 5.1.Introduction.
5.2.The BalanceSheet.
5.3.The Income Statement.
5.4.The Statement ofCashFlows.
5.5.The Statement ofChanges inEquity.
5.6.Notestothe Annual Accounts.
5.7.Consolidated Annual Accounts.

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 BALANCESHEET
5.1: INTRODUCTION. Assets,liabilitiesandequity

INCOMESTATEMENT
Incomeandexpenses(profit/loss)

STATATEMENTOFCASHFLOWS
Documents Originanduseofmonetaryassetsrepresenting
cashandcashequivalents
STATEMENTOFCHANGESINEQUITY
Statementofrecognisedincomeandexpense
andStatementoftotalchangesinequity
NOTESTOTHEANNUALACCOUNTS
Theycomplementandexpanduponthe
SpanishGeneralAccounting informationprovidedintheotherdocuments
Plan:Partthree
PreparationofAnnualAccounts:
Preparation
Publication,nameofthereportingentityandthe
periodtowhichtheyrefer,

Standardoabbreviated,basedon:
Structure Totalassets
Totalannualrevenue
Averagenumberofemployees

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 5.2: THE BALANCE SHEET.

Assets =Equity +Liabilities

Equity
Noncurrent
assets
Noncurrent
liabilities

Currentassets
Current
liabilities

Economic Resources =Financial Structure

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 BALANCESHEETLAYOUT
Assets =Equity +Liabilities
- Capitalandreserveswithout
valuationadjustments
- Intangibleassets - Valuationadjustments
Equity
- Property,plant andequipment - Grants,donationsandbequests
- Investment property received
Non - Noncurrent investments ingroup
current companies andassociates - Noncurrentprovisions
assets - Noncurrent investments - Noncurrentpayables
- Deferred tax assets - Groupcompaniesandassociates,
noncurrent Non
- Deferredtaxliabilities current
- Noncurrentaccruals liabilities
- Noncurrentassetsheldforsale
- Inventories - Liabilitiesassociatedwithnoncurrent
- Tradeandotherreceivables assetsheldforsale
Current - Currentinvestmentsingroup - Currentprovisions
assets companiesandassociates - Currentpayables Current
- Currentinvestments - Groupcompaniesandassociates,
- Prepaymentsforcurrentassets
liabilities
current
Cashandcashequivalents - Tradeandotherpayables
- Currentaccruals

Economic resources =Financial structure

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 5.3: THE INCOME STATEMENT.

Results from
Operating Activities
PROFIT/LOSS
FROM
CONTINUING
OPERATIONS PROFIT/LOSS
NetFinance
FORTHE
Income /Expense
PERIOD

PROFIT/LOSS
FROM
DISCONTINUED
OPERATIONS

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 5.4: THE STATEMENT OF CASH FLOWS.

CashFlows from Operating Activities:

Profit /Loss for the period (before tax)

Adjustments for
CashandCash Changes inoperating assets andliabilities CashandCash
equivalents Other cashflows from operating activities equivalents
atBeginning atEnd
ofperiod ofperiod
CashFlows from Investing Activities:

Payments for investments

Proceeds from saleofinvestments

CashFlows from Financing Activities:

Proceeds from andpayments for equity instruments

Proceeds from andpayments for financial liability instruments
Dividends andinterest on other equity instruments paid

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 5.5: THE STATEMENT OF CHANGES IN EQUITY.

A)StatementofRecognisedIncomeandExpense:

Profit(loss)fortheperiod
Incomeandexpenserecogniseddirectlyinequity
AmountstransferedtotheIncomeStatement

B) Statement of Total Changes in Equity:

Total recognised income and expense

Changes in equity due to transactions with equity holders or owners
Other changes in equity
Adjustments for changes in accounting policies and corrections of errors

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 5.6: NOTES TO THE ANNUAL ACCOUNTS.
1.Activityofthecompany
2.Basisofpresentationoftheannualaccounts
3.Distributionofprofit/applicationoflosses
4.Recognitionandmeasurementstandards
5.Property,plantandequipment
6.Investmentproperty
7.Intangibleassets
8.Leasesandsimilartransactions
9.Financialinstruments
Thenotes
10.Inventories
complementand 11.Foreigncurrency
expanduponthe 12.Taxation
informationprovided 13.Incomeandexpenses
intheother 14.Provisionsandcontingencies
15.Environmentalinformation
documents
16.Longtermemployeebenefits
comprisingthe 17.Sharebasedpaymenttransactions
annualaccounts 18.Grants,donationsandbequests
19.Businesscombinations
20.Jointventures
21.Noncurrentassetsheldforsaleanddiscontinuedoperations
22.Eventsafterthebalancesheetdate
23. Relatedpartytransactions
24. Otherinformation
25. Segmentinformation

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 5.7: CONSOLIDATED ANNUAL ACCOUNTS.

If a company (parent company) exercises control over the activities

of another (subsidiary company), that is, the directors of the parent
company dictate the subsidiary companys policies, a group is said
to exist.

When there is a group, a set of financial statements is drawn up

annually not only for each individual company but also for the
group taken as a whole (consolidated financial statements).

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