AS 3315: Reporting on Condensed Financial Statements and Selected Financial Data

11 Nothing in this section is intended to preclude an auditor from expressing an opinion on one or more specified elements, accounts, or items of a financial statement, providing the provisions of AS 3305are observed. Depreciation and amortization are non-cash expenses that are created by accountants to spread out the cost of capital assets such as Property, Plant, and Equipment (PP&E). Most businesses have some expenses related to selling goods and/or services. Marketing, advertising, and promotion expenses are often grouped together as they are similar expenses, all related to selling.

• This condensed income statement for ABC Company provides a simplified overview of the company’s financial performance for the quarter ended March 31, 2023.
• PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network.
• This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
• These deductions are subtracted from the revenue figure to derive a net revenue number.

While these drivers are commonly used, they are just general guidelines. There are situations where intuition must be exercised to determine the proper driver or assumption to use. Instead, an analyst may have to rely on examining the past trend of COGS to determine assumptions for forecasting COGS into the future.

Condensed income statement definition

Finally, we arrive at the net income (or net loss), which is then divided by the weighted average shares outstanding to determine the Earnings Per Share (EPS). Gross Profit Gross profit is calculated by subtracting Cost of Goods Sold (or Cost of Sales) from Sales Revenue. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.

The Income Statement is one of a company’s core financial statements that shows their profit and loss over a period of time. The profit or loss is determined by taking all revenues and subtracting all expenses from both operating and non-operating activities. We have reviewed the condensed consolidated balance sheet of ABC Company and subsidiaries as of March 31, 19X1, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 19X1 and 19X0.

What is a condensed income statement?

Another option is for a business to present a different line item for each revenue source, such as one line for goods sold and another line for services sold. The components as income statement and statement of comprehensive income are financial reports. Investors are very much interested in these financial reports for decision making in evaluation of investment. The users of the condensed income statements would find it easier to go through this statement glancing directly at what the company has been doing. The amounts of OCI are not included in the entity’s net income or retained earnings but just on the OCI component of the statement of comprehensive income. When examining a condensed set of financials, you should be extra critical when looking at each line item.

In the latter case, the report format is called a statement of comprehensive income. Net income is the difference between revenues and expenses and is obtained from the income statement. On the other hand, OCI includes all whats in a product warranty heres how to get the most out of them other items that are excluded from the purview of the income statement. After preparing the skeleton of an income statement as such, it can then be integrated into a proper financial model to forecast future performance.

Gross Profit

Where any major balance sheet caption is less than 10% of total assets, and the amount in the caption has not increased or decreased by more than 25% since the end of the preceding fiscal year, the caption may be combined with others. The most common type of income statement is the classified income statement. It is structured to include subtotals for the gross margin, all operating expenses, and again for all non-operating expenses.

How to Report Product Sales Revenue & Service Revenue on an Income Statement

A condensed format is useful when reporting to outside users that only care about the general results reported by a business. The income statement presents the financial results of a business for a stated period of time. The statement quantifies the amount of revenue generated and expenses incurred by an organization during a reporting period, as well as any resulting net profit or net loss. The income statement is an essential part of the financial statements that an organization releases. The other parts of the financial statements are the balance sheet and statement of cash flows.

The income statement provides details on revenues and expenses, including payable taxes and interest charges. Consolidated financial statements will present the same overall financial picture of the company as the full financial statements, but items that would normally be several line items in the full version will be condensed down to one line for brevity. For example, the condensed financial statement will only show one line for “total revenue,” while the full earnings report will show revenue by operating division, products, services, interest, and any other source of revenue. First, input historical data for any available time periods into the income statement template in Excel. Format historical data input using a specific format in order to be able to differentiate between hard-coded data and calculated data. As a reminder, a common method of formatting such data is to color any hard-coded input in blue while coloring calculated data or linking data in black.

This statement is a great place to begin a financial model, as it requires the least amount of information from the balance sheet and cash flow statement. Thus, in terms of information, the income statement is a predecessor to the other two core statements. The operating expenses section contains a number of line items that may instead be classified as selling, general and administrative expenses. It includes all expenses required to run the business that were not already included in the cost of goods sold. These expenses cover the areas of sales, marketing, IT, risk management, human resources, accounting, and finance. The line items in this section may be stated by function, such as rent expense, utilities expense, and compensation expense.

These materials were downloaded from PwC’s Viewpoint (viewpoint.pwc.com) under license. Income statements are used by a variety of people outside and inside the company. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. You can set the default content filter to expand search across territories. Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI’s full course catalog and accredited Certification Programs.

However, it’s important to note that a condensed income statement may not provide sufficient detail for a comprehensive financial analysis. In such cases, a full income statement with detailed line items and accompanying financial statements would be necessary for a thorough evaluation. Interim statements of comprehensive income shall also include major captions prescribed by the applicable sections of Regulation S-X. If losses were incurred in each of the most recent three years, the average loss shall be used for purposes of this test. Notwithstanding these tests, Rule 4-02 of Regulation S-X applies and de minimis amounts therefore need not be shown separately, except that registrants reporting under Article 9 shall show investment securities gains or losses separately regardless of size.

These financial statements are the responsibility of the company’s management. The condensed financial statements must adhere to Generally Accepted Accounting Principles (GAAP) and may at times be provided to interested parties in lieu of full financial statements. The auditing team conducting an audit of the company will usually view condensed financial statements along with full financial statements for a full picture of the company’s financial standing. A condensed income statement may present a single line item for revenue and a single line item for expenses, while a condensed balance sheet may be restricted to as little as a total amount for assets, liabilities, and equity. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles.