Financial Statements

/financial-statements

If you see unfamiliar placeholders or need to check which tools are connected, see CONNECTORS.md.

Important: This command assists with financial statement workflows but does not provide financial advice. All statements should be reviewed by qualified financial professionals before use in reporting or filings.

Generate financial statements with period-over-period comparison and variance analysis. The workflow below walks through income statement generation; balance sheet and cash flow statement reference formats, GAAP presentation requirements (ASC 220/210/230), and common period-end adjustments are included as supporting reference material.

Usage

/financial-statements <period-type> <period>

Arguments

• period-type — The reporting period type:
  • monthly — Single month P&L with prior month and prior year month comparison
  • quarterly — Quarter P&L with prior quarter and prior year quarter comparison
  • annual — Full year P&L with prior year comparison
  • ytd — Year-to-date P&L with prior year YTD comparison
• period — The period to report (e.g., 2024-12, 2024-Q4, 2024)

Workflow

1. Gather Financial Data

If ~~erp or ~~data warehouse is connected:

• Pull trial balance or income statement data for the specified period
• Pull comparison period data (prior period, prior year, budget/forecast)
• Pull account hierarchy and groupings for presentation

If no data source is connected:

Connect ~~erp or ~~data warehouse to pull financial data automatically. You can also paste trial balance data, upload a spreadsheet, or provide income statement data for analysis.

Prompt the user to provide:

• Current period revenue and expense data (by account or category)
• Comparison period data (prior period, prior year, and/or budget)
• Any known adjustments or reclassifications

2. Generate Income Statement

Present in standard multi-column format:

INCOME STATEMENTPeriod: [Period description](in thousands, unless otherwise noted)
                              Current    Prior      Variance   Variance   Budget    Budget                              Period     Period     ($)        (%)        Amount    Var ($)                              --------   --------   --------   --------   --------  --------REVENUE  Product revenue             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  Service revenue             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  Other revenue               $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX                              --------   --------   --------              --------  --------TOTAL REVENUE                 $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
COST OF REVENUE  [Cost items]                $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX                              --------   --------   --------              --------  --------GROSS PROFIT                  $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  Gross Margin                XX.X%      XX.X%
OPERATING EXPENSES  Research & development      $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  Sales & marketing           $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  General & administrative    $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX                              --------   --------   --------              --------  --------TOTAL OPERATING EXPENSES      $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
OPERATING INCOME (LOSS)       $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  Operating Margin            XX.X%      XX.X%
OTHER INCOME (EXPENSE)  Interest income             $XX,XXX    $XX,XXX    $X,XXX     X.X%  Interest expense           ($XX,XXX)  ($XX,XXX)   $X,XXX     X.X%  Other, net                  $XX,XXX    $XX,XXX    $X,XXX     X.X%                              --------   --------   --------TOTAL OTHER INCOME (EXPENSE)  $XX,XXX    $XX,XXX    $X,XXX     X.X%
INCOME BEFORE TAXES           $XX,XXX    $XX,XXX    $X,XXX     X.X%  Income tax expense          $XX,XXX    $XX,XXX    $X,XXX     X.X%                              --------   --------   --------
NET INCOME (LOSS)             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX  Net Margin                  XX.X%      XX.X%

3. Variance Analysis

For each line item, calculate and flag material variances.

Variance Calculation

For each line item, calculate:

• Dollar variance: Current period - Prior period (or current period - budget)
• Percentage variance: (Current - Prior) / |Prior| x 100
• Basis point change: For margins and ratios, express change in basis points (1 bp = 0.01%)

Materiality Thresholds

Define what constitutes a "material" variance requiring investigation. Common approaches:

• Fixed dollar threshold: Variances exceeding a set dollar amount (e.g., $50K, $100K)
• Percentage threshold: Variances exceeding a set percentage (e.g., 10%, 15%)
• Combined: Either the dollar OR percentage threshold is exceeded
• Scaled: Different thresholds for different line items based on their size and volatility

Example thresholds (adjust for your organization):

Variance Decomposition

Break down total variance into component drivers:

• Volume/quantity effect: Change in volume at prior period rates
• Rate/price effect: Change in rate/price at current period volume
• Mix effect: Shift in composition between items with different rates/margins
• New/discontinued items: Items present in one period but not the other
• One-time/non-recurring items: Items that are not expected to repeat
• Timing effect: Items shifting between periods (not a true change in run rate)
• Currency effect: Impact of FX rate changes on translated results

Investigation and Narrative

For each material variance:

1. Quantify the variance ($ and %)
2. Identify whether favorable or unfavorable
3. Decompose into drivers using the categories above
4. Provide a narrative explanation of the business reason
5. Assess whether the variance is temporary or represents a trend change
6. Note any actions required (further investigation, forecast update, process change)

4. Key Metrics Summary

KEY METRICS                              Current    Prior      ChangeRevenue growth (%)                                  X.X%Gross margin (%)              XX.X%      XX.X%      X.X ppOperating margin (%)          XX.X%      XX.X%      X.X ppNet margin (%)                XX.X%      XX.X%      X.X ppOpEx as % of revenue          XX.X%      XX.X%      X.X ppEffective tax rate (%)        XX.X%      XX.X%      X.X pp

5. Material Variance Summary

List all material variances requiring investigation:

6. Output

Provide:

1. Formatted income statement with comparisons
2. Key metrics summary
3. Material variance listing with investigation flags
4. Suggested follow-up questions for unexplained variances
5. Offer to drill into any specific variance with /flux

GAAP Presentation Requirements

Income Statement (ASC 220 / IAS 1)

• Present all items of income and expense recognized in a period
• Classify expenses either by nature (materials, labor, depreciation) or by function (COGS, R&D, S&M, G&A) — function is more common for US companies
• If classified by function, disclose depreciation, amortization, and employee benefit costs by nature in the notes
• Present operating and non-operating items separately
• Show income tax expense as a separate line
• Extraordinary items are prohibited under both US GAAP and IFRS
• Discontinued operations presented separately, net of tax

Common presentation considerations:

• Revenue disaggregation: ASC 606 requires disaggregation of revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue are affected by economic factors
• Stock-based compensation: Classify within the functional expense categories (R&D, S&M, G&A) with total SBC disclosed in notes
• Restructuring charges: Present separately if material, or include in operating expenses with note disclosure
• Non-GAAP adjustments: If presenting non-GAAP measures (common in earnings releases), clearly label and reconcile to GAAP

Balance Sheet (ASC 210 / IAS 1)

• Distinguish between current and non-current assets and liabilities
• Current: expected to be realized, consumed, or settled within 12 months (or the operating cycle if longer)
• Present assets in order of liquidity (most liquid first) — standard US practice
• Accounts receivable shown net of allowance for credit losses (ASC 326)
• Property and equipment shown net of accumulated depreciation
• Goodwill is not amortized — tested for impairment annually (ASC 350)
• Leases: recognize right-of-use assets and lease liabilities for operating and finance leases (ASC 842)

Cash Flow Statement (ASC 230 / IAS 7)

• Indirect method is most common (start with net income, adjust for non-cash items)
• Direct method is permitted but rarely used (requires supplemental indirect reconciliation)
• Interest paid and income taxes paid must be disclosed (either on the face or in notes)
• Non-cash investing and financing activities disclosed separately (e.g., assets acquired under leases, stock issued for acquisitions)
• Cash equivalents: short-term, highly liquid investments with original maturities of 3 months or less

Balance Sheet Reference Format

ASSETSCurrent Assets  Cash and cash equivalents  Short-term investments  Accounts receivable, net  Inventory  Prepaid expenses and other current assetsTotal Current Assets
Non-Current Assets  Property and equipment, net  Operating lease right-of-use assets  Goodwill  Intangible assets, net  Long-term investments  Other non-current assetsTotal Non-Current Assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities  Accounts payable  Accrued liabilities  Deferred revenue, current portion  Current portion of long-term debt  Operating lease liabilities, current portion  Other current liabilitiesTotal Current Liabilities
Non-Current Liabilities  Long-term debt  Deferred revenue, non-current  Operating lease liabilities, non-current  Other non-current liabilitiesTotal Non-Current Liabilities
Total Liabilities
Stockholders' Equity  Common stock  Additional paid-in capital  Retained earnings (accumulated deficit)  Accumulated other comprehensive income (loss)  Treasury stockTotal Stockholders' Equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

Cash Flow Statement Reference Format (Indirect Method)

CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)Adjustments to reconcile net income to net cash from operations:  Depreciation and amortization  Stock-based compensation  Amortization of debt issuance costs  Deferred income taxes  Loss (gain) on disposal of assets  Impairment charges  Other non-cash itemsChanges in operating assets and liabilities:  Accounts receivable  Inventory  Prepaid expenses and other assets  Accounts payable  Accrued liabilities  Deferred revenue  Other liabilitiesNet Cash Provided by (Used in) Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES  Purchases of property and equipment  Purchases of investments  Proceeds from sale/maturity of investments  Acquisitions, net of cash acquired  Other investing activitiesNet Cash Provided by (Used in) Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES  Proceeds from issuance of debt  Repayment of debt  Proceeds from issuance of common stock  Repurchases of common stock  Dividends paid  Payment of debt issuance costs  Other financing activitiesNet Cash Provided by (Used in) Financing Activities
Effect of exchange rate changes on cash
Net Increase (Decrease) in Cash and Cash EquivalentsCash and cash equivalents, beginning of periodCash and cash equivalents, end of period

Common Adjustments and Reclassifications

Period-End Adjustments

1. Accruals: Record expenses incurred but not yet paid (AP accruals, payroll accruals, interest accruals)
2. Deferrals: Adjust prepaid expenses, deferred revenue, and deferred costs for the period
3. Depreciation and amortization: Book periodic depreciation/amortization from fixed asset and intangible schedules
4. Bad debt provision: Adjust allowance for credit losses based on aging analysis and historical loss rates
5. Inventory adjustments: Record write-downs for obsolete, slow-moving, or impaired inventory
6. FX revaluation: Revalue foreign-currency-denominated monetary assets and liabilities at period-end rates
7. Tax provision: Record current and deferred income tax expense
8. Fair value adjustments: Mark-to-market investments, derivatives, and other fair-value items

Reclassifications

1. Current/non-current reclassification: Reclassify long-term debt maturing within 12 months to current
2. Contra account netting: Net allowances against gross receivables, accumulated depreciation against gross assets
3. Intercompany elimination: Eliminate intercompany balances and transactions in consolidation
4. Discontinued operations: Reclassify results of discontinued operations to a separate line item
5. Equity method adjustments: Record share of investee income/loss for equity method investments
6. Segment reclassifications: Ensure transactions are properly classified by operating segment