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Financial Statement, Friend or Foe?

Management IP

Financial Statements
Financial statements are a collection of reports about an organization's financial results, financial
condition, and cash flows. They are useful for the following reasons:
-To determine the ability of a business to generate cash, and the sources and uses of that cash.
-To determine whether a business has the capability to pay back its debts.
-To track financial results on a trend line to spot any looming profitability issues.
-To derive financial ratios from the statements that can indicate the condition of the business.
-To investigate the details of certain business transactions, as outlined in the disclosures that
accompany the statements.

The standard contents of a set of financial statements are:

Balance sheet. Shows the entity's assets, liabilities, and stockholders' equity as of the report date.
It does not show information that covers a span of time.
Income statement. Shows the results of the entity's operations and financial activities for the
reporting period. It includes revenues, expenses, gains, and losses. Statement of cash flows.
Shows changes in the entity's cash flows during the reporting period.
Supplementary notes. Includes explanations of various activities, additional detail on some
accounts, and other items as mandated by the applicable accounting framework, such as GAAP
or IFRS.
If a business plans to issue financial statements to outside users (such as investors or lenders), the
financial statements should be formatted in accordance with one of the major accounting
frameworks. These frameworks allow for some leeway in how financial statements can be
structured, so statements issued by different firms even in the same industry are likely to have
somewhat different appearances.
If financial statements are issued strictly for internal use, there are no guidelines, other than
common usage, for how the statements are to be presented. At the most minimal level, a business
is expected to issue an income statement and balance sheet to document its monthly results and
ending financial condition. The full set of financial statements is expected when a business is
reporting the results for a full fiscal year, or when a publicly-held business is reporting the results
of its fiscal quarters.

The advantages of the financial statements:

-Financial reports financial reports can serve as a guide for sure in knowing information about
the financial position, financial performance, and changes in the company's capital in the past.
-Financial statements serve as a worthy consideration in the decision making of the company in
the future.
-Financial statements may indicate the value of the company's cash and the distribution of
changes in detail, as well as demonstrate the value increase or decrease in cash the company in
-The financial statements can be used as a guide to evaluate all activities of the business which
are run at the company.
-The financial statements can be used as a guide for assessing all business activities that will be
running the company in the future.
-The financial statements can be used as a guide to determine the prospects of companies and
their financial status.
-The financial statements can be used as a guide to ensure smooth payment item that is carried
out to the supplier.
-The financial statements can be used as a guide to ensure the company's ability in relation to a
refund or loan payments to the creditors.
-The financial statements can be used as a guide for employees to know stability and
pofitiabilitas company they work for.
-The financial statements can be used as a basis of liability financial company run up during a
certain period of time, and can serve as a regulator of balance between income and expenditure
of the company for a certain period of time.
-The financial statements can be used as a guide in providing information to the needs of the
parties involved in the preparation of the financial statements.
-The financial statements can be used as a guide in providing reports and interpretation of the
conditions and financial potential.

The disadvantages of financial statements:

-The financial statements could not be presented in detail, because it is only classified in the
accounts or tables with a specific code.
-Financial statement is not always served timely, because the work was complicated and takes
more time.
-Financial statements often referred to as the report expires. This, again, because of the work
process are complicated and take a long time.
-The financial statements are sometimes still necessary adjustments, if the value changes due to
several factors.
-The financial statements are sometimes not easy to understand for the layman. This is because
the financial statements are presented with technical accounting language, use the language of
Indonesia as well as the international language or the United Kingdom.
-The financial statements have a concept or rules that vary each year. This is because Financial
accounting standards (SAK) which is the principle of financial reports are still being perfected by
the bonds of Accountants (IAI) Indonesia every year.
-The financial statements can not illustrate the variety of factors that may affect the company's
financial circumstances.
-The financial statements are not equipped a special understanding that explains the technical
terms used in it.
-The financial statements of the general nature and not geared to meet the needs of the company,
so that the information presented is often not directional and just pay attention to the needs of all
interested parties that actually had a difference of interests.
-Financial statement only refers to the object of the analysis of the financial statements. Whereas,
to assess the financial Iaporan not quite simply seen from the figures presented in the tables of
the financial statements.
-Financial statements became a benchmark of progress/retrogression of a company that is only
viewed from the numbers without looking at other aspects, such as the purpose of the company,
its economic situation, the situation of the industry, management style, and the culture of the
-Financial report are conservative in the face of uncertainty, especially when in it there are some
uncertain conclusions concerning the assessment of a post.

-Financial statement using figures in rupiah which looked certain and precise, but actually those
figures could not be used as a guide for sure in the international scale, because the default value
of the rupiah which is often fickle.

Financial statements: Friend or foe?

The length of companies audited financial statements has increased by more than
half since 2005, according to a new report by business advisory firm Deloitte.
Financial statements of listed companies have grown by 57% in the four year period
to 2009, and now average 47 pages in length. In the last year alone, a growth of 6%
was reported.
If the 2008/2009 increase is repeated every year through to 2020, the average
length will be over 100 pages solely for the audited financial statements.


The article above is one of many examples of shortcomings disadvantages of financial statement.
As more losses than benefits then in my opinion the financial statements is the enemy. but again
it depends from the point of view of where we see it.
for example, if we look at it from the point of view of the owner of the company or employees of
a particular company, certainly there will be many benefits that we get from the financial
statements, although there is a shortage but a lot more upside. But if we look at it from the point
of view of us as an investor, certainly there will be many disadvantages compared to the benefits
we gain.
but it's not always like that, to prevent that the we look at a company's track record. If its track
record cleaner we can believe that company. but it's certainly not a guarantee the company will
always be clean, could be the future of the company can conduct financial manipulations. based
on my analysis above, I can conclude that the financial statements could be a good companion
for us, but it can also be a very dangerous enemy if there are elements of manipulation there


Cara Praktis Menyusun Laporan Keuangan By Akifa P. Nayla