Income Statement Format & Layout
In 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 it 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.
An income statement is the statement of a particular organization’s income incurred over a certain period of time.
- The income statement comprises of the company’s revenue (amount of money made from sales of goods), cost of goods sold (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 expenses (the amount of money spent in general operations and maintenance of business) and operating income (this amount is calculated as the difference between the revenue and the total amount spent in producing the goods and maintaining the business).
- Net income of a company is calculated as the difference between the revenue and all expenses of the company.
You can download this Income Statement Excel Format here – Income Statement Excel Template
Income Statement Format for US Based Company
Each country has different regulations under which an income statement is compiled for the companies that are registered in that country. Similarly, the USA too has its own regulations and formats for listing income statements of companies. In the USA as per the ruling of the Securities and Exchange Commission (SEC), it is mandatory to publish consolidated income statement on a quarterly basis. Stand-alone income statements are different from consolidated ones. For an investor to take the right decision it is important for a company to publish a consolidated financial statement (inclusive of parent company and subsidiaries). A uniform accounting policy needs to be maintained while preparing an income statement.
source: Starbucks SEC filings
Under IAS 27, a consolidated income statement is compiled by taking the financial statements of the parent company and its subsidiaries. If transactions have happened within the group, then it is mandatory to take into account all of that. Also, the parent company’s investment in the subsidiaries is taken into consideration.
While calculating minority interests there are two things to consider.
- Firstly, a non-controlling interest of the subsidiaries in the profit and loss is to be identified.
- Secondly, the non-controlling interest of each subsidiary should be calculated separately from the parent’s ownership in them.
Keep in mind that filing the income statement the date for the parent company and the subsidiaries should be the same.
source: Starbucks SEC filings
US companies usually follow GAAP accounting principles while filing income statements.
- For preparing consolidated income statements under GAAP, a company must have a majority (more than 50%) voting power in another company.
- If your business holds 20% to 50% in equity then 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 revenue of the parent company is the expense of the subsidiary, it should be removed.
In the US, publicly traded companies need to file their income statements under GAAP. A comparative study between GAAP and non-GAAP accounting standards for US companies such as Pegasystems in 2014 and 2015 occur due to adjustments regarding acquisition and restructuring of expenses, amortization of acquired assets, equity-based compensation expenses and other technicalities.
|2015 GAAP||2015 Non-GAAP|
|Diluted Earnings per Share||$0.42||$0.72|
The Income Statement Format for UK Based Companies
In the UK companies are using 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) that were trading in the regulated market of the UK 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 are required to use the IFRS standard as adopted by EU in their consolidated income statements. For foreign companies operating EU, they 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 statement according to the IFRS or UK GAAP standards. Companies that are charities may still continue to use UK GAAP. If companies are preparing both individual and consolidated income statements then the choice of abiding by UK GAAP and IFRS remains separately for them. However, under Article 4 of the IAS Regulation, some companies are to use IFRS for their consolidated financial statement.
The Income Statement Format for Indian Companies
source: Reliance Annual Report
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 financial statement in India consists of the following components:
- Balance Sheet: Balance sheet shows the value of economic resources controlled by an enterprise as well as the liquidity and solvency of that company.
- Statement of Profit and Loss: Profit and Loss is part of the financial statement lays down the basics of how the enterprise is functioning.
- The Cash Flow Statement: draws a picture by which you can determine the income and how it is used in the company
- Notes and Schedules: this part consists of supplementary information explaining different modules of the income statement.
Income statements of a company in India are prepared to keep in mind that the entity will continue operating in the foreseeable future without any need to curtail the scale of operations. The financial statement should be prepared in a lucid language so that it is understandable by all stakeholders such as investors, employees, creditors, government agencies and even the public. Income statement in India consists of information that only affects the economic decisions of the company.
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 the net revenue generated by the company. It is always advisable to follow the standard prescribed by the accounting bodies of that particular country. There are many different accounting regulations all across the world that are universally accepted by all the countries in the world and maintain standardization so that they maintain globally to keep parity and consistency.
This has been a guide to Income Statement Formats and Layouts. Here we learn components of the income statement and Income statement formats and layouts for US Based, UK Based and Indian Companies. You may learn more about financing from the following articles –