Financial Statements

1---2name: financial-statements3description: Generate financial statements (income statement, balance sheet, cash flow) with period-over-period comparison and variance analysis. Use when preparing a monthly or quarterly P&L, closing the books and need to flag material variances, comparing actuals to budget, building a financial summary for leadership review, or looking up GAAP presentation requirements and period-end adjustments.4argument-hint: "<frequency> <period>"5---6 7# /financial-statements8 9> If you see unfamiliar placeholders or need to check which tools are connected, see [CONNECTORS.md](../../CONNECTORS.md).10 11**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.12 13Generate 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.14 15## Usage16 17```18/financial-statements <period-type> <period>19```20 21### Arguments22 23- `period-type` — The reporting period type:24  - `monthly` — Single month P&L with prior month and prior year month comparison25  - `quarterly` — Quarter P&L with prior quarter and prior year quarter comparison26  - `annual` — Full year P&L with prior year comparison27  - `ytd` — Year-to-date P&L with prior year YTD comparison28- `period` — The period to report (e.g., `2024-12`, `2024-Q4`, `2024`)29 30## Workflow31 32### 1. Gather Financial Data33 34If ~~erp or ~~data warehouse is connected:35- Pull trial balance or income statement data for the specified period36- Pull comparison period data (prior period, prior year, budget/forecast)37- Pull account hierarchy and groupings for presentation38 39If no data source is connected:40> 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.41 42Prompt the user to provide:43- Current period revenue and expense data (by account or category)44- Comparison period data (prior period, prior year, and/or budget)45- Any known adjustments or reclassifications46 47### 2. Generate Income Statement48 49Present in standard multi-column format:50 51```52INCOME STATEMENT53Period: [Period description]54(in thousands, unless otherwise noted)55 56                              Current    Prior      Variance   Variance   Budget    Budget57                              Period     Period     ($)        (%)        Amount    Var ($)58                              --------   --------   --------   --------   --------  --------59REVENUE60  Product revenue             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX61  Service revenue             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX62  Other revenue               $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX63                              --------   --------   --------              --------  --------64TOTAL REVENUE                 $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX65 66COST OF REVENUE67  [Cost items]                $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX68                              --------   --------   --------              --------  --------69GROSS PROFIT                  $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX70  Gross Margin                XX.X%      XX.X%71 72OPERATING EXPENSES73  Research & development      $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX74  Sales & marketing           $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX75  General & administrative    $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX76                              --------   --------   --------              --------  --------77TOTAL OPERATING EXPENSES      $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX78 79OPERATING INCOME (LOSS)       $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX80  Operating Margin            XX.X%      XX.X%81 82OTHER INCOME (EXPENSE)83  Interest income             $XX,XXX    $XX,XXX    $X,XXX     X.X%84  Interest expense           ($XX,XXX)  ($XX,XXX)   $X,XXX     X.X%85  Other, net                  $XX,XXX    $XX,XXX    $X,XXX     X.X%86                              --------   --------   --------87TOTAL OTHER INCOME (EXPENSE)  $XX,XXX    $XX,XXX    $X,XXX     X.X%88 89INCOME BEFORE TAXES           $XX,XXX    $XX,XXX    $X,XXX     X.X%90  Income tax expense          $XX,XXX    $XX,XXX    $X,XXX     X.X%91                              --------   --------   --------92 93NET INCOME (LOSS)             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX94  Net Margin                  XX.X%      XX.X%95```96 97### 3. Variance Analysis98 99For each line item, calculate and flag material variances.100 101#### Variance Calculation102 103For each line item, calculate:104- **Dollar variance:** Current period - Prior period (or current period - budget)105- **Percentage variance:** (Current - Prior) / |Prior| x 100106- **Basis point change:** For margins and ratios, express change in basis points (1 bp = 0.01%)107 108#### Materiality Thresholds109 110Define what constitutes a "material" variance requiring investigation. Common approaches:111 112- **Fixed dollar threshold:** Variances exceeding a set dollar amount (e.g., $50K, $100K)113- **Percentage threshold:** Variances exceeding a set percentage (e.g., 10%, 15%)114- **Combined:** Either the dollar OR percentage threshold is exceeded115- **Scaled:** Different thresholds for different line items based on their size and volatility116 117*Example thresholds (adjust for your organization):*118 119| Line Item Size | Dollar Threshold | Percentage Threshold |120|---------------|-----------------|---------------------|121| > $10M        | $500K           | 5%                  |122| $1M - $10M    | $100K           | 10%                 |123| < $1M         | $50K            | 15%                 |124 125#### Variance Decomposition126 127Break down total variance into component drivers:128 129- **Volume/quantity effect:** Change in volume at prior period rates130- **Rate/price effect:** Change in rate/price at current period volume131- **Mix effect:** Shift in composition between items with different rates/margins132- **New/discontinued items:** Items present in one period but not the other133- **One-time/non-recurring items:** Items that are not expected to repeat134- **Timing effect:** Items shifting between periods (not a true change in run rate)135- **Currency effect:** Impact of FX rate changes on translated results136 137#### Investigation and Narrative138 139For each material variance:1401. Quantify the variance ($ and %)1412. Identify whether favorable or unfavorable1423. Decompose into drivers using the categories above1434. Provide a narrative explanation of the business reason1445. Assess whether the variance is temporary or represents a trend change1456. Note any actions required (further investigation, forecast update, process change)146 147### 4. Key Metrics Summary148 149```150KEY METRICS151                              Current    Prior      Change152Revenue growth (%)                                  X.X%153Gross margin (%)              XX.X%      XX.X%      X.X pp154Operating margin (%)          XX.X%      XX.X%      X.X pp155Net margin (%)                XX.X%      XX.X%      X.X pp156OpEx as % of revenue          XX.X%      XX.X%      X.X pp157Effective tax rate (%)        XX.X%      XX.X%      X.X pp158```159 160### 5. Material Variance Summary161 162List all material variances requiring investigation:163 164| Line Item | Variance ($) | Variance (%) | Direction | Preliminary Driver | Action |165|-----------|-------------|-------------|-----------|-------------------|--------|166| [Item]    | $X,XXX      | X.X%        | Unfav.    | [If known]        | Investigate |167 168### 6. Output169 170Provide:1711. Formatted income statement with comparisons1722. Key metrics summary1733. Material variance listing with investigation flags1744. Suggested follow-up questions for unexplained variances1755. Offer to drill into any specific variance with `/flux`176 177## GAAP Presentation Requirements178 179### Income Statement (ASC 220 / IAS 1)180 181- Present all items of income and expense recognized in a period182- Classify expenses either by nature (materials, labor, depreciation) or by function (COGS, R&D, S&M, G&A) — function is more common for US companies183- If classified by function, disclose depreciation, amortization, and employee benefit costs by nature in the notes184- Present operating and non-operating items separately185- Show income tax expense as a separate line186- Extraordinary items are prohibited under both US GAAP and IFRS187- Discontinued operations presented separately, net of tax188 189**Common presentation considerations:**190 191- **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 factors192- **Stock-based compensation:** Classify within the functional expense categories (R&D, S&M, G&A) with total SBC disclosed in notes193- **Restructuring charges:** Present separately if material, or include in operating expenses with note disclosure194- **Non-GAAP adjustments:** If presenting non-GAAP measures (common in earnings releases), clearly label and reconcile to GAAP195 196### Balance Sheet (ASC 210 / IAS 1)197 198- Distinguish between current and non-current assets and liabilities199- Current: expected to be realized, consumed, or settled within 12 months (or the operating cycle if longer)200- Present assets in order of liquidity (most liquid first) — standard US practice201- Accounts receivable shown net of allowance for credit losses (ASC 326)202- Property and equipment shown net of accumulated depreciation203- Goodwill is not amortized — tested for impairment annually (ASC 350)204- Leases: recognize right-of-use assets and lease liabilities for operating and finance leases (ASC 842)205 206### Cash Flow Statement (ASC 230 / IAS 7)207 208- Indirect method is most common (start with net income, adjust for non-cash items)209- Direct method is permitted but rarely used (requires supplemental indirect reconciliation)210- Interest paid and income taxes paid must be disclosed (either on the face or in notes)211- Non-cash investing and financing activities disclosed separately (e.g., assets acquired under leases, stock issued for acquisitions)212- Cash equivalents: short-term, highly liquid investments with original maturities of 3 months or less213 214## Balance Sheet Reference Format215 216```217ASSETS218Current Assets219  Cash and cash equivalents220  Short-term investments221  Accounts receivable, net222  Inventory223  Prepaid expenses and other current assets224Total Current Assets225 226Non-Current Assets227  Property and equipment, net228  Operating lease right-of-use assets229  Goodwill230  Intangible assets, net231  Long-term investments232  Other non-current assets233Total Non-Current Assets234 235TOTAL ASSETS236 237LIABILITIES AND STOCKHOLDERS' EQUITY238Current Liabilities239  Accounts payable240  Accrued liabilities241  Deferred revenue, current portion242  Current portion of long-term debt243  Operating lease liabilities, current portion244  Other current liabilities245Total Current Liabilities246 247Non-Current Liabilities248  Long-term debt249  Deferred revenue, non-current250  Operating lease liabilities, non-current251  Other non-current liabilities252Total Non-Current Liabilities253 254Total Liabilities255 256Stockholders' Equity257  Common stock258  Additional paid-in capital259  Retained earnings (accumulated deficit)260  Accumulated other comprehensive income (loss)261  Treasury stock262Total Stockholders' Equity263 264TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY265```266 267## Cash Flow Statement Reference Format (Indirect Method)268 269```270CASH FLOWS FROM OPERATING ACTIVITIES271Net income (loss)272Adjustments to reconcile net income to net cash from operations:273  Depreciation and amortization274  Stock-based compensation275  Amortization of debt issuance costs276  Deferred income taxes277  Loss (gain) on disposal of assets278  Impairment charges279  Other non-cash items280Changes in operating assets and liabilities:281  Accounts receivable282  Inventory283  Prepaid expenses and other assets284  Accounts payable285  Accrued liabilities286  Deferred revenue287  Other liabilities288Net Cash Provided by (Used in) Operating Activities289 290CASH FLOWS FROM INVESTING ACTIVITIES291  Purchases of property and equipment292  Purchases of investments293  Proceeds from sale/maturity of investments294  Acquisitions, net of cash acquired295  Other investing activities296Net Cash Provided by (Used in) Investing Activities297 298CASH FLOWS FROM FINANCING ACTIVITIES299  Proceeds from issuance of debt300  Repayment of debt301  Proceeds from issuance of common stock302  Repurchases of common stock303  Dividends paid304  Payment of debt issuance costs305  Other financing activities306Net Cash Provided by (Used in) Financing Activities307 308Effect of exchange rate changes on cash309 310Net Increase (Decrease) in Cash and Cash Equivalents311Cash and cash equivalents, beginning of period312Cash and cash equivalents, end of period313```314 315## Common Adjustments and Reclassifications316 317### Period-End Adjustments318 3191. **Accruals:** Record expenses incurred but not yet paid (AP accruals, payroll accruals, interest accruals)3202. **Deferrals:** Adjust prepaid expenses, deferred revenue, and deferred costs for the period3213. **Depreciation and amortization:** Book periodic depreciation/amortization from fixed asset and intangible schedules3224. **Bad debt provision:** Adjust allowance for credit losses based on aging analysis and historical loss rates3235. **Inventory adjustments:** Record write-downs for obsolete, slow-moving, or impaired inventory3246. **FX revaluation:** Revalue foreign-currency-denominated monetary assets and liabilities at period-end rates3257. **Tax provision:** Record current and deferred income tax expense3268. **Fair value adjustments:** Mark-to-market investments, derivatives, and other fair-value items327 328### Reclassifications329 3301. **Current/non-current reclassification:** Reclassify long-term debt maturing within 12 months to current3312. **Contra account netting:** Net allowances against gross receivables, accumulated depreciation against gross assets3323. **Intercompany elimination:** Eliminate intercompany balances and transactions in consolidation3334. **Discontinued operations:** Reclassify results of discontinued operations to a separate line item3345. **Equity method adjustments:** Record share of investee income/loss for equity method investments3356. **Segment reclassifications:** Ensure transactions are properly classified by operating segment