What is the Financial Statement?

Beyond a mere concept of financial accounting, Financial Statements are a tool of great importance that allows the realization of a patrimonial and economic diagnosis of a company. As a result, it will permit us to know the income statement, cash flow, and liquidity, among other concepts that will help make strategic decisions.

Learn more about Financial Statements

Financial statements are documents where all the operations performed by a company in a given period are recorded. Information on how much has been invoiced, the total balance of purchases, outstanding debt to suppliers, credit amortization, and the amount of payments to employees are some of the operations to be recorded.

But the real value is not knowing all the financial movement information. This information in an aggregated, grouped, and global way, takes the necessary real value that the Financial Statements must offer. It is the accounting information of a company grouped by specific periods that will allow a correct evaluation.

What does a Financial Statement or General Accounting Plan comprise?

A Financial Statement should consist of the following documents:

1. Balance Sheet

Also known as a balance sheet, it is a document that compiles information on the company’s liabilities or debts and assets and the difference between the two, thus forming the company’s equity or stockholders equity. This document shows the financial health and accounting stability of the company.

2. Income statement

Also known as the profit and loss statement, it is a document that reflects the difference between income and expenses. Through this document, the company can measure whether it is making a profit or loss from its operations. 

3. Cash Flows

This document is vital since it is established as an indicator of great relevance to indicate the liquidity of a company since it reflects the inflows and outflows of money or flow of the company during a given time.

4. Statements of Changes

This document reflects capital increases, distribution of dividends, or anything that results in a change in the company’s net worth.

5. Reports

It is the document that exposes clearly and concisely all the information of the accounting of the company in a much more detailed way.

What is the Irish Auditing and Accounting Supervisory Authority?

It is the body in charge of regulating all financial reporting and accounting for Irish companies. In Ireland, companies are not required to use mandatory software for the company, but they must generate Financial Statements and obtain approval for them.

Companies have a period of nine months after their creation to process and obtain approval of their financial statements. On the other hand, companies with unlimited status will obtain approval of their financial statements in a short period. 

On the other hand, Limited Liability Companies must submit their financial statements to the Corporate Office to evaluate their respective approval. In the case of these companies, all the information is in the public domain.

Irish accounting system

It is crucial to know that the Irish accounting system differs significantly from the accounting system of other nations because, in Ireland, there are more regulations than in other countries regarding the accounting system of companies. 

For example, U.S. companies are governed by Generally Accepted Accounting Principles (GAAP). Those principles have been established by the Financial Accounting Standards Board to regulate all aspects of corporate accounting.

So, while a company in the United States is governed only by Generally Accepted Accounting Principles (GAAP) when preparing financial statements, companies in Ireland must also follow International Financial Reporting Standards (IFRS). 

In Ireland, accounting specialists must accurately handle the International Financial Reporting Standards (IFRS). These standards were created and established by the European Union (EU) to simplify the financial reporting of both Irish and European companies.

Irish Tax Calendar

At the time of filing their financial statements, Irish companies have a standard guideline for making the respective disclosures required for the preparation of the statements. 

There must exist consistency between the classification, presentation of the information, and evaluation of the same when preparing the annual accounts, including balance sheets, profit and loss accounts, and the respective notes to the accounts.

It is important to emphasize that Ireland does not have a fixed fiscal year as in other countries. The fiscal year of each Irish company starts on the date of incorporation and ends on the date, not later than 18 months after its incorporation. In other words, each company in Ireland has its tax year.

By default, Irish companies are required to exercise their financial statements within twelve months after the end of their first financial year. The directors or managers of the company will have the discretion to add a grace period of not more than seven days to deliver the financial statements to the regulatory body.

FRS102 or Financial Reporting Standard applicable in the United Kingdom and Ireland

FRS102 is the regulatory accounting standard governing the financial reporting regime in the United Kingdom and the Republic of Ireland. It presents the necessary financial reporting requirements for entities that do not apply the adopted IFRS, IAS 101, or IAS 105.

This standard and its requirements are based on the International Financial Reporting Standard for Small and Medium-Sized Entities. Some significant modifications have been made to this standard for application in the United Kingdom and the Republic of Ireland.

This standard is subject to a regular review at least every five years.

This standard requires goodwill to be amortized over its useful life. However, if it is not capable of providing a reliable assessment of its useful life, such entities should not exceed five years. 

As a result, goodwill will be affected in their balance sheets, thus accelerating amortization, which will depress the reported goodwill reserves. Goodwill under Irish GAAP is treated following FRS 10 and acquired intangibles will be amortized over their useful life which should not exceed 20 years.

Likewise, when investing in real estate any accounting company in Ireland must adhere to FRS102 which is responsible for the calculation of the initial cost of investment property. Measuring, if possible, a real and reasonable value that does not generate undue effort or costs to make a reasonable valuation.

To conclude this post, the accounting system of the Republic of Ireland has differences compared to international accounting standards. But, these differences do not prevent companies from making their respective financial statements to assess the soundness of the company.