6. Types of Financial Statements by Abdiansyah Prahasto.pptx

Abdiansyah Prahasto share about the types of financial statements to FISIP Unpad Business Administration students.

1. Series 1 Types of Financial Statements 1 Februari 2024 Guest Lecture in Business Administration (International Undergraduate Programme) by Abdiansyah Prahasto 24 September 2025

2. With you today.. Abdiansyah Prahasto (Abi) Governor Chair of Education and Professional Development Committee Certification Certified Internal Auditor (CIA) Certification in Audit Committee Practices (CACP) Indonesia Internal Audit Practitioner (IIAP) Education Doctor in Strategic Management (ongoing), Universitas Indonesia Master of Business Administration, Universitas Gadjah Mada Bachelor of Economics in Accounting, Universitas Padjadjaran Director Assurance Website : abdiansyahprahasto.com Phone: [phone]

3. Our agenda today 1 Introduction 2 Types of financial statements 3 Q & A

4. Introduction 1

5. “Financial statements are the most important invention in the history of capitalism.” (Ray Ball, Accounting Hall of Famer)

6. Median loss of financial statement fraud Sumber : ACFE A Report to The Nations (2024)

7. Example of financial statement fraud around the world Enron used special purpose entities (SPEs) to hide massive debts off its balance sheet and inflated revenues through mark-to-market accounting. The company collapsed, causing shareholders to lose about $74 billion. Fraudulently capitalized line costs instead of expensing them, and inflated revenues with fake accounting entries. About $11 billion in overstated assets, leading to bankruptcy. Parmalat created fake bank accounts, forged documents, and used shell companies to hide €14 billion of debt. Wirecard falsely reported €1.9 billion of cash that didn’t exist, using fake third-party acquirers to inflate sales.

8. Example of financial statement fraud Indonesia Garuda recognized ~US$239–212 million of income/receivables from a multi-year. That recognition flipped 2018 from a loss to a small profit on paper. After regulators intervened, Garuda restated 2018 and booked a loss of Rp2.45 trillion. Jiwasraya manipulated financial reporting to show solvency and profitability, while hiding massive investment losses. State losses estimated at Rp 16.8 trillion. Misstated financial statements, including overstatement of Rp 4 trillion in receivables. Fabricated financial reports and falsified receivables to obtain loans from 14 banks. Banks lost over Rp 14 trillion.

9. Understanding what each type of financial statement should (and should not) show helps professionals spot anomalies early T he income statement : s usceptible to premature revenue recognition, expense capitalization, fictitious sales. T he statement of financial position : Risk of fictitious assets, overstated receivables, hidden liabilities. T he statement of stockholders’ equity : Track sudden movements in reserves, unusual dividend entries, or share-based schemes. T he statement of cash flows : Inconsistencies between profit and cash from operations can signal manipulation.

10. Understanding what each type of financial statement can optimize business decision T he income statement : Identifies profitable and loss-making products and helps in setting pricing strategies and cost control. T he statement of financial position : Strong asset management attracts banks & investors. Healthy debt-to-equity ratio makes it easier to get financing for expansion. T he statement of stockholders’ equity : Helps assess dividend vs. reinvestment trade-offs. T he statement of cash flows : Detects if profits are turning into real cash and guides decision on whether growth should be financed via debt, equity, or internal cash.

11. Types of financial statements 1

12. The four key financial statements for reporting to shareholders are: the income statement, the statement of financial position, the statement of stockholders’ equity, and the statement of cash flows .

13. T he income statement , it provides a financial summary of the firm’s operating results during a specified period. Top-line vs bottom-line. Japan’s SoftBank Group reported a US$32 billion net loss in 2022. It is one of the largest “bottom lines” in history. Most famous frauds (Enron, WorldCom, Garuda Indonesia) started here because investors and analysts watch the profit figure first before any other FS. By analyzing gross margin, operating margin, net margin, you can tell if a company is cost-driven, innovation-driven, or volume-driven. Psychological: Companies sometimes prefer to report a tiny profit rather than a small loss because crossing the “zero line” has a massive psychological effect on investors.

14. The statement of financial position , it presents a summary statement of the firm’s financial position at a given time. The oldest type of financial statement. If it doesn’t balance, something’s wrong, either in math or in accounting entries. As of 2025, the People’s Bank of China (PBOC) has the largest balance sheet in the world: US$6 trillion in assets. Hidden power in working capital

15. The statement of stockholders’ equity , it shows all equity account transactions that occurred during a given year. It became a mandatory standalone statement under IFRS/PSAK only in the early 2000s, to increase transparency on shareholder value movements. Growth in retained earnings = business is compounding wealth. Growth in share capital = owners or public put more money in. Shrinking equity = warning sign (losses, heavy dividends, or buybacks beyond earnings). Bridges between the Statement of Financial Position (equity section) and the Income Statement (net income).

16. The statement of cash flows , it is a summary of the cash flows over the period of concern T he cash flow statement became mandatory only in the 1980s. Before it was required, analysts had trouble reconciling why companies with strong P&L still failed. It connects earnings with liquidity. Classic fraud detection tool. A company can report big profits but still go bankrupt if operating cash is negative. You can tell a company’s growth stage. Revenue is vanity, profit is sanity, cash is reality.

17. The notes to the financial statements , it provides detailed information on the accounting policies, procedures, calculations, and transactions underlying entries in the financial statements. The longest part of financial statements. The notes take up 70–80% of the pages. Studies show less than 20% of retail investors actually read notes in detail. Yet auditors, analysts, and regulators often start from the notes first, because that’s where the “real story” sits. By reading the notes, you can tell if a company is conservative, aggressive, or opportunistic in accounting. Many mergers are “telegraphed” here before the press releases, via vague wording like “subsequent events” or “material contract discussions.” Warren Buffet said, “The main statements are just the table of contents. The notes tell you the real book.”

18. What anti-fraud controls are most common? Sumber : ACFE A Report to The Nations (2024)

19. “Financial statements are the most important invention in the history of capitalism.” (Ray Ball, Accounting Hall of Famer)