financial-statements

/financial-statements

If you see unfamiliar placeholders or need to check which tools are connected, see CONNECTORS.md.

Important: This command assists with financial statement workflows but does not provide financial advice. All statements should be reviewed by qualified financial professionals before use in reporting or filings.

Generate financial statements with period-over-period comparison and variance analysis. The workflow below walks through income statement generation; balance sheet and cash flow statement reference formats, GAAP presentation requirements (ASC 220/210/230), and common period-end adjustments are included as supporting reference material.

Usage

/financial-statements <period-type> <period>

Arguments

• period-type — The reporting period type:
  • monthly — Single month P&L with prior month and prior year month comparison
  • quarterly — Quarter P&L with prior quarter and prior year quarter comparison
  • annual — Full year P&L with prior year comparison
  • ytd — Year-to-date P&L with prior year YTD comparison
• period — The period to report (e.g., 2024-12, 2024-Q4, 2024)

Workflow

1. Gather Financial Data

If ~~erp or ~~data warehouse is connected:

• Pull trial balance or income statement data for the specified period
• Pull comparison period data (prior period, prior year, budget/forecast)
• Pull account hierarchy and groupings for presentation

If no data source is connected:

Connect ~~erp or ~~data warehouse to pull financial data automatically. You can also paste trial balance data, upload a spreadsheet, or provide income statement data for analysis.

Prompt the user to provide:

• Current period revenue and expense data (by account or category)
• Comparison period data (prior period, prior year, and/or budget)
• Any known adjustments or reclassifications

2. Generate Income Statement

Present in standard multi-column format:

INCOME STATEMENT
Period: [Period description]
(in thousands, unless otherwise noted)

                              Current    Prior      Variance   Variance   Budget    Budget
                              Period     Period     ($)        (%)        Amount    Var ($)
                              --------   --------   --------   --------   --------  --------
REVENUE
  Product revenue             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  Service revenue             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  Other revenue               $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
                              --------   --------   --------              --------  --------
TOTAL REVENUE                 $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX

COST OF REVENUE
  [Cost items]                $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
                              --------   --------   --------              --------  --------
GROSS PROFIT                  $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  Gross Margin                XX.X%      XX.X%

OPERATING EXPENSES
  Research & development      $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  Sales & marketing           $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  General & administrative    $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
                              --------   --------   --------              --------  --------
TOTAL OPERATING EXPENSES      $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX

OPERATING INCOME (LOSS)       $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  Operating Margin            XX.X%      XX.X%

OTHER INCOME (EXPENSE)
  Interest income             $XX,XXX    $XX,XXX    $X,XXX     X.X%
  Interest expense           ($XX,XXX)  ($XX,XXX)   $X,XXX     X.X%
  Other, net                  $XX,XXX    $XX,XXX    $X,XXX     X.X%
                              --------   --------   --------
TOTAL OTHER INCOME (EXPENSE)  $XX,XXX    $XX,XXX    $X,XXX     X.X%

INCOME BEFORE TAXES           $XX,XXX    $XX,XXX    $X,XXX     X.X%
  Income tax expense          $XX,XXX    $XX,XXX    $X,XXX     X.X%
                              --------   --------   --------

NET INCOME (LOSS)             $XX,XXX    $XX,XXX    $X,XXX     X.X%       $XX,XXX   $X,XXX
  Net Margin                  XX.X%      XX.X%

3. Variance Analysis

For each line item, calculate and flag material variances.

Variance Calculation

For each line item, calculate:

• Dollar variance: Current period - Prior period (or current period - budget)
• Percentage variance: (Current - Prior) / |Prior| x 100
• Basis point change: For margins and ratios, express change in basis points (1 bp = 0.01%)

Materiality Thresholds

Define what constitutes a "material" variance requiring investigation. Common approaches:

• Fixed dollar threshold: Variances exceeding a set dollar amount (e.g., $50K, $100K)
• Percentage threshold: Variances exceeding a set percentage (e.g., 10%, 15%)
• Combined: Either the dollar OR percentage threshold is exceeded
• Scaled: Different thresholds for different line items based on their size and volatility

Example thresholds (adjust for your organization):

Variance Decomposition

Break down total variance into component drivers:

• Volume/quantity effect: Change in volume at prior period rates
• Rate/price effect: Change in rate/price at current period volume
• Mix effect: Shift in composition between items with different rates/margins
• New/discontinued items: Items present in one period but not the other
• One-time/non-recurring items: Items that are not expected to repeat
• Timing effect: Items shifting between periods (not a true change in run rate)
• Currency effect: Impact of FX rate changes on translated results

Investigation and Narrative

For each material variance:

1. Quantify the variance ($ and %)
2. Identify whether favorable or unfavorable
3. Decompose into drivers using the categories above
4. Provide a narrative explanation of the business reason
5. Assess whether the variance is temporary or represents a trend change
6. Note any actions required (further investigation, forecast update, process change)

4. Key Metrics Summary

KEY METRICS
                              Current    Prior      Change
Revenue growth (%)                                  X.X%
Gross margin (%)              XX.X%      XX.X%      X.X pp
Operating margin (%)          XX.X%      XX.X%      X.X pp
Net margin (%)                XX.X%      XX.X%      X.X pp
OpEx as % of revenue          XX.X%      XX.X%      X.X pp
Effective tax rate (%)        XX.X%      XX.X%      X.X pp

5. Material Variance Summary

List all material variances requiring investigation:

6. Output

Provide:

1. Formatted income statement with comparisons
2. Key metrics summary
3. Material variance listing with investigation flags
4. Suggested follow-up questions for unexplained variances
5. Offer to drill into any specific variance with /flux

GAAP Presentation Requirements

Income Statement (ASC 220 / IAS 1)

• Present all items of income and expense recognized in a period
• Classify expenses either by nature (materials, labor, depreciation) or by function (COGS, R&D, S&M, G&A) — function is more common for US companies
• If classified by function, disclose depreciation, amortization, and employee benefit costs by nature in the notes
• Present operating and non-operating items separately
• Show income tax expense as a separate line
• Extraordinary items are prohibited under both US GAAP and IFRS
• Discontinued operations presented separately, net of tax

Common presentation considerations:

• Revenue disaggregation: ASC 606 requires disaggregation of revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue are affected by economic factors
• Stock-based compensation: Classify within the functional expense categories (R&D, S&M, G&A) with total SBC disclosed in notes
• Restructuring charges: Present separately if material, or include in operating expenses with note disclosure
• Non-GAAP adjustments: If presenting non-GAAP measures (common in earnings releases), clearly label and reconcile to GAAP

Balance Sheet (ASC 210 / IAS 1)

• Distinguish between current and non-current assets and liabilities
• Current: expected to be realized, consumed, or settled within 12 months (or the operating cycle if longer)
• Present assets in order of liquidity (most liquid first) — standard US practice
• Accounts receivable shown net of allowance for credit losses (ASC 326)
• Property and equipment shown net of accumulated depreciation
• Goodwill is not amortized — tested for impairment annually (ASC 350)
• Leases: recognize right-of-use assets and lease liabilities for operating and finance leases (ASC 842)

Cash Flow Statement (ASC 230 / IAS 7)

• Indirect method is most common (start with net income, adjust for non-cash items)
• Direct method is permitted but rarely used (requires supplemental indirect reconciliation)
• Interest paid and income taxes paid must be disclosed (either on the face or in notes)
• Non-cash investing and financing activities disclosed separately (e.g., assets acquired under leases,

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