Financial statements are documents that a company prepares and discloses, with the objective of representing its accounting and financial flow in a certain period.
The disclosure of these statements is mandatory under law 6404/76 for corporations, presented to the public that have an interest, such as shareholders or partners.
The importance of financial statements
Although mandatory for some companies, it is important to prepare the financial statements so that they become a kind of “map” for administrators, assisting in decision making compared to periods prior to the current one.
In addition, with the release of these statements, partners and shareholders can analyze the growth of the organization and show interest in investing.
What are the mandatory financial statements?
The preparation of the financial (financial) statements takes place at the end of the period by the administrative and accounting sector of the company.
The disclosure of financial statements is mandatory under Brazilian law for publicly traded companies, where in a document with the following structure:
- Balance Sheet;
- Statement of Income for the Year – DRE;
- Statement of Cash Flows – DFC;
- Statement of Changes in Stockholders’ Equity – DMPL;
- Statement of Added Value – DVA;
- Explanatory Notes.
The Balance Sheet is intended to demonstrate the company’s financial and equity situation, detailing what the company has between assets, rights and obligations.
This document provides an overview of the company’s activities, such as how much you have to pay to suppliers and to receive from customers.
Statement of Income for the Year (DRE)
The Income Statement for the Year is designed to show the operations carried out within the period that added income or expenses for the company.
The DRE is also used to calculate taxes, mainly Income Tax, in addition to knowing whether the company made a profit or loss in the period.
Cash Flow Statement (DFC)
The Cash Flow Statement is responsible for the inflows and outflows of money, during the period, in the company’s cash.
The cash account must already appear on the Balance Sheet, but only with its final amount. Here it will be detailed between operational payments and receipts, investments and financing.
Statement of Changes in Equity (DMPL)
The purpose of this statement is to present changes in equity, that is, how much the organization’s “wealth” increased or decreased during the period.
DMPL already has the Accumulated Profit or Loss Statement (DLPA) integrated, a more simplified statement only for the changes that led to the organization’s profit.
Statement of Added Value (DVA)
The Statement of Added Value aims to show the creation of wealth during the period, and the form in which it was distributed.
What DVA does is to detail how this wealth was distributed among employees, suppliers, financing agents, shareholders and the government, that is, among all sectors that participated, directly or indirectly, in its generation.
Other statements that companies present
When preparing and disclosing their statements, publicly traded companies must also include other items in the attachment that make it possible to complement the accounting and financial information.
The Explanatory Notes are mandatory by law, appearing after the statements as a complement to all information. The objective is to present in more detail the evaluation criteria and values that are implicit in the statements.
There are also the Administrative Reports and the Opinions of independent auditors and the fiscal council, documents that increase the credibility of the financial statements for the appreciation of the general public.
The Social Report is a non-mandatory document, which demonstrates in detail social responsibility indicators that the company manages, such as for the environment and with employees.