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.
- 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. comprises of 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. (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. (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).
- The 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 registered in that country. Similarly, the USA, too, has its 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 statements quarterly. Stand-alone income statements are different from consolidated ones. For an investor to make the right decision, a company needs to publish a consolidated financial statementConsolidated 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. (inclusive of 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. 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 companyParent 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. 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 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., there are two things to consider.
- Firstly, a non-controlling interestA Non-controlling InterestIt generally projects curves on the data sets. For example, to forecast population growth, forming a non-linear relationship between time and growth. 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 GAAP Accounting PrinciplesGAAP (Generally Accepted Accounting Principles) are standardized guidelines for accounting and financial reporting. 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 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 revenue of the parent company is the expense of the subsidiary, 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. need to file their income statements under GAAP. 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. 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 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.||$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 the EU in their consolidated income statements. For foreign companies operating the 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 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 separate 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 components of financial statement in India consists of the following:
- Balance Sheet: The Balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company. 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 net revenueNet RevenueNet revenue refers to a company's sales realization acquired after deducting all the directly related selling expenses such as discount, return and other such costs from the gross sales revenue it generated.. 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 article 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 –