Financial statements
What specifically must be in the financial statements is governed by local law and
regulation and standards such as international financial reporting standards, however
generally they must include a balance sheet (showing assets, liabilities and equity),
income statement, cash flow statement and equity statement (showing changes in
equity). These are typically also referred to as the primary statements. Usually financial
statements are accompanied by additional disclosures (see the disclosures definition
above).
14 Generally Accepted Accounting Principles (GAAP)
See accounting standards above.
15 Generally Accepted Auditing Standards (GAAS)
See auditing standards above.
16 Going concern
Management’s assumption that the company will continue to operate for the foreseeable
future. Financial statements are prepared on a going concern basis, unless management
either intends to liquidate the company or to cease operations, or has no realistic
alternative but to do so. In these cases, the break-up basis is used (see above). The going
concern basis is one in which the assets and liabilities of the business are realised and
settled in the normal course of its activities.
17 Income statement
A financial statement that measures a company’s financial performance over a specific
accounting period.
18 Internal control systems
The processes designed, implemented and maintained by those charged with
governance, management and other personnel to provide reasonable assurance about
the achievement of an entity’s objectives with regard to reliability of financial
reporting, effectiveness and efficiency of operations, and compliance with applicable
laws and regulations.
19 Listed company
A listed company is a company whose shares can be bought and sold by the general
public and are listed on a stock exchange, such as the London Stock Exchange.