Financial Statements

From Open Risk Manual


Financial Statements is a collection of disclosures, typically by incorporated legal entities. Financial statements are a particular form of general purpose Financial Reporting. Financial statements provide information about economic Resources of a Reporting Entity, claims against the entity, and changes in those resources and claims, that meet the scope and definitions of the elements of financial statements. This scope and definitions are in turn articulated in the applicable Financial Reporting Standards.

Elements of Financial Statements

The elements of financial statements are

  • Assets
  • Liabilities
  • Equity
  • Income
  • Expenses

Common Financial Statements

The precise composition (number, title and content of financial statements) is part of the Financial Reporting Standards under which an entity is Reporting its financial condition. A typical set might include[1]:

Fundamental Requirements

Reporting on the state of an entity over time requires in principle only two types of reports:

  • A Stock Variable report that lists measured characteristics of an entity at a snapshot of time
  • A Flow Variable report that lists changes in measured characteristics over an interval of time

These two fundamental reports are in principle linked via identities (conservation laws) that stipulate that changes in stock variables are affected only through flow variables.

The balance sheet report is the only financial statement that focuses on stock variables. The other statements are flow reports that single out specific flows and stocks for their particular importance:

  • Cash as the simplest / most fundamental financial asset in monetary systems / economies
  • Equity as the principal contractual relationship providing investment Capital

See Also


  1. Smaller entities and simpler operations might have further options to reduce the number / content of reports