Introduction to Listed Company Accounts
– the components of the annual report of a listed company
– primary statements
– the difference between an income statement, balance sheet, and cash flow statement of a listed company
A listed company might have as many as 20 different reports plus the accounts themselves and related notes. So they are much longer reports that fall into one of the three following categories:
· Strategy: several reports on the business, its markets, strategy, employees, finance etc.
· Governance: includes the directors’ report and the auditors’ report plus reports on things like directors’ remuneration and corporate governance.
· Financials: includes the accounts and the related notes.
It’s impossible to expect investors to look at the accounts of each individual company in this family of companies, so the main company (known as the parent) is obliged to produce group accounts or consolidated accounts.
What are Consolidated Accounts?
Essentially one set of accounts that presents the financial picture of the entire group of companies as if it were just one company.
Thus, the accounting for some of these transactions can appear and sometimes be quite complex.
These three statements are called primary statements.
There are also two other primary statements that didn’t appear earlier which we will briefly cover.
– It is described as consolidated: this means it is the P&L of a group of at least two companies.
Sometimes, the P& L will have three columns of figures for each year, where column 1 is continuing operations, column 2 is discontinued operations, and column 3 is the total group.
It therefore adjusts the figures as it sees fit to show adjusted profit. In the example above, they have not shown adjusted profit on the P&L at all but have made some adjustments and thus have come up with adjusted earnings per share, which you can see in line 33.
There are some components, which we haven’t covered yet, but we’ll be learning more about them soon.
When we looked at the balance sheet in the first week, there were three components that made up shareholders’ equity:
· share capital
· share premium
· retained profit
In the example above, we have a heading called Equity, which has two sub-headings:
· shareholders’ equity
· non-controlling interests
Let’s ignore the non-controlling interests for now and come back to this later.
– Share related: these components relate to the money shareholders have put into the company.
– Profit related: these components relate to profit made by the company.
The cash flow statement is similar to what we saw earlier in that it starts with profit and then explains why the cash increase/decrease was different from profit.
However, that there are only three category headings while before we had seen five.
· finance the company
· invest the funds raised in various assets
· operate those assets
Sometimes, you will find the details of the operating activities category is in the notes rather than in the actual cash flow statement.