Income Statement Formats

Updated on April 4, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Income Statement Formats

In the Income statement, there is a standard format that is used while preparing the Income statement of the company, which reports the sales revenue figure of the business at the start, then adds other income into it; after that, all the business expenses are deducted from the total amount of revenue and other income generated and finally we get the amount of net profit/loss of the business entity.

Income Statement Formats

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Different countries have different formats of filing their income statements under different accounting standards. The basic premise of an income statement is to provide a clear picture of the transactions made by the company and net revenue. Therefore, it is always advisable to follow the standard prescribed by the accounting bodies of that particular country.

Income Statement Formats Explained

An income statement is the statement of a particular organization’s income incurred over a certain period.

The income statementThe Income StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.read more comprises the company’s revenue (amount of money made from sales of goods), cost of goods soldCost Of Goods SoldThe Cost of Goods Sold (COGS) is the cumulative total of direct costs incurred for the goods or services sold, including direct expenses like raw material, direct labour cost and other direct costs. However, it excludes all the indirect expenses incurred by the company. read more (cost of producing the goods), gross profit or loss (this amount is calculated as the difference between the revenue and the cost of producing the goods), operating expensesOperating ExpensesOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more (the amount of money spent in general operations and maintenance of business) and operating incomeOperating IncomeOperating Income, also known as EBIT or Recurring Profit, is an important yardstick of profit measurement and reflects the operating performance of the business. It doesn’t take into consideration non-operating gains or losses suffered by businesses, the impact of financial leverage, and tax factors. It is calculated as the difference between Gross Profit and Operating Expenses of the business.read more (this amount is calculated as the difference between the revenue and the total amount spent in producing the goods and maintaining the business).

A comprehensive income statement format is calculated as the difference between the revenue and all expenses.  There are many different accounting regulations worldwide that are universally accepted by all the countries in the world and maintain standardization so that they maintain globally to keep parity and consistency. Let us understand the format for income statement in detail.

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Income Statement Video Explanation

 

Types

The format for income statement can be of two types, single-step and multi-step. Let us explain them in detail.

Single Step Format:

In this format, the statement displays a summary of the financial performance of the business over a specific time period. It is a very simple format and has a few line items. It is easy to understand and interpret. The main revenue heads include sales revenue, investment income and revenue from interest.

The expense category has the heads depreciation, cost of goods sold, employee salaries, rent and utilities. The overall equation is:

Net income = (Revenue + Gains) – (Expenses +Losses)

Multi Step Format:

It has a number of levels and more detail. It has separate detail for accounting the operating and non-operating revenues and expenses.

It uses a number of equations to calculate operating income, gross profit and net profit.

Formats In Different Countries

US Based Company

Each country has different regulations under which comprehensive income statement format is compiled for registered companies. Similarly, the USA has rules and forms for listing companies’ income statements. In the USA, as per the ruling of the Securities and Exchange Commission (SEC), publishing consolidated income statements quarterly is mandatory. Stand-alone income statements are different from consolidated ones. For an investor to make the right decision, a company must issue a consolidated financial information Consolidated Financial StatementConsolidated Financial Statements are the financial statements of the overall group, which include all three key financial statements – income statement, cash flow statement, and balance sheet – and represent the sum total of its parents and all of its subsidiaries.read more (including the parent company and subsidiaries). Accounting policiesAccounting PoliciesAccounting policies refer to the framework or procedure followed by the management for bookkeeping and preparation of the financial statements. It involves accounting methods and practices determined at the corporate level.read more need to be maintained while preparing an income statement.

  • For preparing comprehensive income statement format under GAAP, a company must have a majority (more than 50%) voting power in another company.
  • If your business holds 20% to 50% equity, then the income statement must be reported in the equity method. According to GAAP, in consolidated statements, equity portions should be removed.
  • Non-controlling interests should be used in subsidiaries that are not fully owned. While preparing the consolidated income statement, if the parent company’s revenue is the subsidiary’s expense, it should be removed.

In the US, publicly traded companiesPublicly Traded CompaniesPublicly Traded Companies, also called Publicly Listed Companies, are the Companies which list their shares on the public stock exchange allowing the trading of shares to the common public. It means that anybody can sell or buy these companies’ shares from the open market.read more must file their GAAP income statements. However, a comparative study between GAAP and non-GAAPComparative Study Between GAAP And Non-GAAPGAAP stands for Generally Accepted Accounting Principles which lay down a uniform set of rules and formats, along with guidelines for measurement, presentation, disclosure and recognition where companies need to follow in its method of accounting. On the other hand, Non-GAAP is any method of accounting followed by the companies other than GAAP where non prescribed standards are followed. It is also called as adjusted earnings.read more accounting standards for US companies such as Pegasystems in 2014 and 2015 occurred due to adjustments regarding acquisition and restructuring of expenses, amortization of acquired assets, equity-based compensation expenses, and other technicalities.

2015 GAAP2015 Non-GAAP
Total Revenue$682,695$682,695
Net Revenue$36,322$63,960
Diluted Earnings per ShareDiluted Earnings Per ShareDiluted EPS is a financial ratio to check the quality of the Earnings per Share after taking into account the exercise of Convertible Securities like Preference Shares, Stock Option, Warrants, Convertible Debentures etc.read more$0.42$0.72

UK-Based Companies

In the UK, companies have been using the International Financial Reporting Standard (IFRS) for filing income statements since 2005. When EC Regulation 1606/2002 became effective. This IAS Regulation required companies with securities (debt or equity) trading in the UK regulated market to use IFRS to file their income statements. The IFRS was endorsed by the European Union, of which the UK was initially a part. All domestic companies whose securities trade in the regulated market must use the IFRS standard adopted by the EU in their consolidated income statements. Foreign companies operating in the EU may use a standard that is equivalent to the IFRS in the UK.

The Companies Act 2006 allows companies (except charities) to prepare their consolidated and individual income statements according to the IFRS or UK GAAP standards. Companies that are charities may continue to use UK GAAP. If companies are preparing individual and consolidated income statements, then the choice of abiding by UK GAAP and IFRS remains separate. However, under Article 4 of the IAS Regulation, some companies are to use IFRS for their consolidated financial statement.

Indian Companies

In India development of accounting standards involves a process following the guidelines of the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India (ICAI).

The components of financial statement in India consist of the following:

A company’s comparative income statement format in India is prepared to keep in mind that the entity will continue operating in the foreseeable future without curling the scale of operations. Therefore, the financial statement should be prepared lucidly so that it is understandable by all stakeholders, such as investors, employees, creditors, government agencies, and even the public. Therefore, the income statement in India consists of information that only affects the economic decisions of the company.

Examples

Let us look at some examples to understand the comparative income statement format.

Example #1

Income Statement Format - US companies

source: Starbucks SEC filings

Under IAS 27, a consolidated income statement is compiled by taking the parent company’s financial statements and its subsidiaries. If transactions have happened within the group, then it is mandatory to consider all of that. Also, the parent company’sParent CompanyA holding company is a company that owns the majority voting shares of another company (subsidiary company). This company also generally controls the management of that company, as well as directs the subsidiary's directions and policies.read more investment in the subsidiaries is considered.

While calculating minority interestsCalculating Minority InterestsMinority interest is the investors' stakeholding that is less than 50% of the existing shares or the voting rights in the company. The minority shareholders do not have control over the company through their voting rights, thereby having a meagre role in the corporate decision-making.read more, there are two things to consider.

Keep in mind that filing the income statement, the date for the parent company and the subsidiaries should be the same.

Income Statement Format - US companies -1

source: Starbucks SEC filings

US companies usually follow GAAP accounting principles GAAP Accounting PrinciplesGAAP (Generally Accepted Accounting Principles) are standardized guidelines for accounting and financial reporting.read more while filing income statements.

Example#2

Income Statement Format - UK companies

source: Nestle.com

Example #3

Income Statement Format - Indian companies

source: Reliance Annual Report

Format In Excel

Many websites offer free income statement format in excel for downloads, which makes it easier for businesses to prepare financial statement. They are in an excel format. One of them is vertex42.com.

It is also possible to download this income statement format in excel here – Income Statement Excel Template

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