Presentation of financial statements

The Companies Act requires the directors to prepare financial statements and various reports each year and to send them to shareholders. The total package, including the full financial statements, rather than summary financial statements, tends to be known as either the ‘Report and Accounts’ (taking this name from the days when the Act required only the directors' report and the annual accounts) or the ‘Annual Report’ (reflecting the fact that the various reports, financial statements and other information together form one report to shareholders). In this chapter we look at the components of the financial statements, or accounts. Other parts of the Report and Accounts, such as the Operating and Financial Review and the Directors' Remuneration Report, are discussed in chapter 20. Some argue that ‘accounts’ refers to the primary statements, while ‘financial statements’ refers to the primary statements together with the notes thereto, but often the two terms are used interchangeably. We use the two terms interchangeably within this book.

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