Comparative financial statements

Comparative financial statements are the complete set of financial statements that an entity issues, revealing information for more than one accounting period. The financial statements that may be included in this package are:

  • The income statement (showing results for multiple periods)
  • The balance sheet (showing the financial position of the entity as of more than one balance sheet date)
  • The statement of cash flows (showing the cash flows for more than one period)

Another variation on the comparative concept is to report information for each of the 12 preceding months on a rolling basis. Comparative financial statements are quite useful for the following reasons:

  • Provides a comparison of an entity's financial performance over multiple periods, so that you can determine trends. The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors.
  • Provides a comparison of expenses to revenues and the proportions of various items on the balance sheet over multiple periods. This information can be useful for cost management purposes.
  • May be useful for predicting future performance, though you should rely more on operational indicators and leading indicators than on historical performance for this type of analysis.

It is customary to issue comparative financial statements with additional columns containing the variance between periods, as well as the percentage change between periods.

The Securities and Exchange Commission requires that a publicly held company use comparative financial statements when reporting to the public on the Form 10-K and Form 10-Q.

Comparative Financial Statements Example

The following is an example of a balance sheet that is presented on a comparative basis.

ABC International
Balance Sheet

  as of
12/31/20X3
as of
12/31/20X2
as of
12/31/20X1
Current assets      
Cash $1,200 $900 $750
Accounts receivable 4,800 3,600 3,000
Inventory 3,600 2,700 2,300
Total current assets $9,600 $7,200 $6,050
Total fixed assets 6,200 5,500 5,000
Total Assets $15,800 $12,700 $11,050
       
Current liabilities      
Accounts payable $2,400 $1,800 $1,500
Accrued expenses 480 360 300
Short-term debt 800 600 400
Total current liabilities $3,680 $2,760 $2,200
Long-term debt 9,020 7,740 7,350
Total liabilities 12,700 10,500 9,550
Shareholders’ equity 3,100 2,200 1,500
Total liabilities and equity $15,800 $12,700 $11,050