When Are the Financial Statements Prepared?

Financial statements are formal records that convey the financial activities and position of a business. These documents include the Balance Sheet, Income Statement, and Cash Flow Statement, each offering a distinct perspective on an entity’s financial health and performance. The Balance Sheet presents a snapshot of assets, liabilities, and equity at a specific point in time, while the Income Statement summarizes revenues and expenses over a period, revealing profitability. The Cash Flow Statement details the movement of cash, showing how cash is generated and used by operating, investing, and financing activities. The preparation of these statements is a fundamental process for any organization, providing essential data for informed decision-making.

Regular Financial Reporting Cycles

Businesses prepare financial statements at various intervals to monitor operations and facilitate management oversight. Monthly financial statements are generated for internal management purposes, allowing leadership to track short-term performance, manage cash flow, and identify trends promptly. This frequent reporting supports agile decision-making and allows for timely adjustments to business strategies.

Quarterly financial statements provide a more comprehensive review of performance over a longer period, used for interim performance assessments, board meetings, and updates to some investors. These statements offer a balanced view, enabling stakeholders to evaluate progress throughout the fiscal year. Annually, a complete set of financial statements is prepared to offer a comprehensive year-end summary of financial activity and position. This annual reporting is important for tax purposes, external audits, and providing a record of the entity’s financial standing to stakeholders, including owners, creditors, and potential investors.

External Reporting Deadlines

Beyond regular internal cycles, specific external deadlines mandate when financial statements must be prepared and submitted to various parties. Publicly traded companies must adhere to filing requirements set by the Securities and Exchange Commission (SEC). These companies are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q. The due dates for these filings vary based on the company’s public float classification.

For example, large accelerated filers must file their annual Form 10-K within 60 days after their fiscal year-end and quarterly Form 10-Q within 40 days after the fiscal quarter-end. Accelerated filers have 75 days for their Form 10-K and 40 days for their Form 10-Q. Non-accelerated filers are granted 90 days for their Form 10-K and 45 days for their Form 10-Q.

Tax authorities also impose deadlines, as businesses must file annual corporate income tax returns, such as Form 1120, which requires finalized financial data. For calendar-year corporations, this return is due by April 15th of the following year, or the 15th day of the fourth month after the fiscal year-end for those on a fiscal year. Loan agreements often include covenants that require businesses to submit financial statements to lenders by specific dates to demonstrate compliance with lending terms.

Special Purpose Financial Statement Preparation

Financial statements are also prepared outside of routine cycles or regulatory mandates when specific events or needs arise. During mergers and acquisitions, detailed financial statements are important for due diligence, allowing prospective buyers to evaluate the target company’s financial standing and historical performance. This preparation may require specific cut-off dates and detailed breakdowns not found in regular reports.

When a business seeks new financing, such as bank loans or equity investments, current and sometimes projected financial statements are prepared to present the company’s financial viability and future prospects to potential lenders or investors. In the event of a business sale, financial statements are prepared to provide buyers with information to assess the company’s value. Internal investigations or audits may trigger the preparation of financial statements for specific periods to address concerns or verify data. Insurance claims for significant losses may necessitate detailed financial statements to document damages and support the claim.

The Accounting Close Process

The ability to prepare financial statements depends on a systematic internal process known as the accounting close. This sequence of activities must be completed at the end of each accounting period to ensure all financial data is accurate and ready for reporting. The process begins with recording all transactions for the period in the accounting system, capturing every revenue and expense item.

An important step involves performing bank reconciliations, which compares the company’s cash balance in its accounting records to the balance reported by the bank. Adjusting entries are then made to account for accruals and deferrals, such as recognizing expenses incurred but not yet paid, or revenues earned but not yet received, to align with the accrual basis of accounting. Reconciling intercompany accounts is also necessary for organizations with multiple related entities, ensuring that transactions between them are eliminated or accounted for.

Before final statements can be generated, a review for unusual transactions or potential errors is conducted. This is followed by finalizing inventory counts and valuations, and calculating non-cash expenses like depreciation and amortization. A trial balance is then prepared, which lists all general ledger accounts and their balances, serving as an internal check that debits equal credits. This process culminates with management review and approval of the data, making the financial information ready for preparation and distribution.