Guide to Understanding Financial Statements

About the Book: Guide to Understanding Financial Statements

As is conventionally known, Financial Statements are a set of reporting templates that provide snap-shot financial results of an organization along with the financial performance for a certain period under reference. The financial information is generated using these templates as conduits based on accounting principles known as International Financial Reporting Standards. These templates are designed in a prescribed format through legislation to generate relevant and fairly representative financial information related to an organization to the users.

Key Features: Guide to Understanding Financial Statements

The makers of these Financial Statements have an onerous responsibility to ensure that, accounting information is fair and represents the firm’s economic performance, financial position, and risk. At the same time, these Financial Statements should provide relevant and credible information to forecast the firm’s expected future earnings and cash flows in order that the users can make informed business decisions based on the reported numbers. Accordingly, the quality of financial reporting needs to articulate fair and accurate economic information contained in the income statement, the balance sheet, the statement of cash flows, and notes to the Financial Statements.

To be honest, the approach to quality of Financial Reporting through the conduit of Financial Statements goes far beyond the compliance of related statutory provisions and International Financial Reporting Standards and an unqualified opinion of the independent auditors. Hence the importance of the interpretation of Financial Statements in their application and analytics cannot be underscored.

Also, qualified users like bankers, financial institutions, and prospective investors use Analytics extensively and apply it to reported financial statements to determine whether they provide useful information that is relevant and reliable for understanding the firm’s financial position, performance, growth, and risk and assists in the projection of the firm’s future earnings and cash flows.

To bring about a simplified approach to the above, I have conceived this body of work, wherein I have made an attempt to bring forth to the reader a simplified understanding of Financial Statements, their interpretation, and application to various areas like business and corporate restructuring, consolidated financial reporting and specific reporting under Non-banking Financial Companies together with Analytics for better understanding and interpretation of the myriad of numbers.

Accordingly, the book has been structured in three sections as explained below.

Section A discusses the building blocks of developing, presenting, and interpreting Financial Statements. These are as follows:

• Financial Statements – an overview.
• Classification of current and non-current assets and liabilities.
• Shareholders’ funds.
• Non-current liabilities.
• Current liabilities.
• Non-current Assets.
• Current Assets.
• Statement of Profit and Loss and Other Comprehensive Income.
• Contingent Liabilities and Assets.
• Other Notes on Accounts.
• Statement of Cash Flows.

Section B highlights the application of Financial Statements as under:

• Corporate Restructuring, including mergers and acquisitions and demergers, and internal reconstruction,
• Consolidated Financial Statements for group reporting purposes
• Financial Statements related Non-Banking Finance Companies (NBFCs)

Section C addresses the analytics related to the health and hygiene of the business, and these are covered as under:

• Business / Financial Analysis,
• Comparative Financial Statements,
• Common size Statements,
• Trend Ratios,
• Forecasting Techniques,
• Ratio Analysis,
• Return on Capital Employed including DuPont Analysis,
• Case studies related to Financial Health and Hygiene Analysis.

Considerable effort has been put into explaining the concepts in simplified and lucid form with many charts, illustrations, and case studies some of which are from the Author’s personal experience.

In developing this body of work, references have been made to various pronouncements made by the Institute of Chartered Accountants of India through its Guidance Notes published from time to time.

I believe the book will be useful for all financial professionals and students, who would like to use this book as a working guide in understanding the concepts and effectively handling the challenges while finalizing Financial Statements.

Pages: 1036 pages

Author: B D Chatterjee

Published on (Date): 12 February 2022

Publisher: Bloomsbury Professional India

ISBN-10 ‏ : ‎ 9354358144

ISBN-13 : ‏  978-9354358142

Format: Paperback

Keywords/Tags/Book Categories: ‘Financial Accounting’, ‘Law’, ‘Analysis & Strategy’

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