Financial Statement Preparation
Htay Aung (Chris)
Introduction
Preparing year-end financial statements can be a daunting task, especially when it comes to document control. The nitty-gritty details such as font, format, headings, accounting standards, and references to notes and disclosures can be overwhelming, even if you have been using a template for years. However, nothing beats a good reference guide and thorough review. This blog post aims to provide you with a comprehensive guide to ensure you have everything covered when preparing your financial statements.
Adhering to Our Company Accounting Standards
One of the most critical aspects of financial statement preparation is adhering to the relevant accounting standards. These standards dictate how financial information should be presented and disclosed. It is crucial to stay updated with any changes in these standards, as non-compliance can lead to significant issues. Ensure that your financial statements meet the requirements of the generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS), depending on your jurisdiction.
1. Opening Balances
Verify that prior year-end balances are correctly carried forward as opening balances for the current year.
2. Cross-Referencing to Notes
Ensure that items requiring additional explanation or disclosure are appropriately cross-referenced to the accompanying notes.
3. Document Structure
Arrange the FS correctly, following the structure dictated by accounting standards.
4. Formatting & Presentation
To maintain consistency and readability, adhere to standard formatting, including font size, headings, line spacing, and numbering.
5. Notes & Disclosures
Establish guidelines for the formatting of notes and disclosures and the presentation of key information. Ensure that all notes are consistently numbered and adequately referenced.
6. Page Numbers & Headers
Include page numbers and headers that clearly identify the financial statements, the organization's name, and the year-end date on each page.
7. Materiality Threshold
Define a materiality threshold and ensure that disclosures and explanations are included for items that exceed this threshold.
8. Compliance with Accounting Standards
Review the FS to ensure that they conform to the specific accounting standards relevant to your organization.
9. Comparative Information
Provide comparative information, showing prior and current figures for easy comparison.
10. Mandatory Disclosures
Ensure that all mandatory disclosures required by the applicable accounting standards, such as IFRS, are included in the financial statements.
11. Review & Sign-Off
Conduct a final review by a responsible party, such as the CFO or controller, to ensure that the document is complete and accurate.
12. Reference to Accounting Policies
Include a clear reference to the accounting policies used within the financial statements to provide transparency on the accounting methods applied.
13. Internal Quality Review
Perform an internal quality review.
14. External Review
If required, engage external auditors or consultants to review the financial statements independently for compliance.
15. Document Retention
Establish a document retention policy to retain copies of prior financial statements for reference and audit trail purposes.