Corporate Finance: Assets, Liabilities, Equity and Financial Statements
Mass Equity
The assets of a company, significant for their financial or economic role, are categorized into various groups within equity. These groups form the basis of balance-sheet accounting. Assets available are homogeneous, sharing the same economic or financial significance. According to the PGC (General Accounting Plan), assets are classified into three main pools, further subdivided:
Assets represent all assets and receivables of the company.
Liabilities: Obligations or debts of the company.
Equity: Employer contributions and earnings.
Asset Subdivisions
Assets are divided into non-current and current assets:
Non-current Assets
These form the company’s permanent structure, ensuring its longevity. They include property and rights not typically converted into cash within a year, such as:
Intangible Assets
Rights with economic value (e.g., patents, trademarks, software).
Tangible Assets
Physical assets for sustainable use (e.g., machinery, buildings, vehicles).
Current Assets
Assets and rights convertible into cash within a year, ensuring business activity equity. They include:
Inventory
Items for company activity (e.g., raw materials, finished goods).
Receivables
Short-term receivables (e.g., from customers, debtors).
Available
Immediately liquid assets (e.g., cash, bank deposits).
Patrimonial Masses: Equity and Liabilities
Shareholders’ Equity
Represents ownership contributions and earnings, the theoretical value of company assets not enforceable by external parties.
Liabilities
Company obligations to third parties, divided into:
Non-current Liabilities
Long-term obligations (e.g., long-term debt).
Current Liabilities
Short-term obligations (e.g., suppliers, trade payables).
Other Financial Statements
The Report complements and comments on information from the Balance Sheet, Profit and Loss Account, Statement of Changes in Equity, and Cash Flow Statements. There are two models: normal and abbreviated. The PGC for SMEs provides a model similar to the abbreviated one. The report should facilitate understanding of the annual accounts, fairly reflecting the company’s assets, liabilities, financial position, and results, referring to both the current and past financial year.
Statement of Changes in Equity
Provides information on equity changes due to income, expenses, and other operations. Content varies based on the PGC:
- PGC: Presented in two parts:
- Revenue and expense.
- Statement of total changes in equity.
- SME PGC: Presented as the Statement of Changes in Equity.
Cash Flow Statement
Reports receipts and payments during the year, showing the company’s cash generation ability. It classifies movements by activities and indicates the net change in cash and cash equivalents. It is mandatory for companies using the normal balance sheet model; SMEs and micro-enterprises are exempt but must conform to the PGC if they choose to submit it.