What are Comparative Financial Statements?

Comparative financial statements are the complete set of financial statements that an entity issues, revealing information for more than one reporting period. The financial statements that may be included in this package are as follows:

The income statement (showing results for multiple periods)
The balance sheet (showing the financial position of the entity as of more than one balance sheet date)
The statement of cash flows (showing the cash flows for more than one period)

Another variation on the comparative concept is to report information for each of the 12 preceding months on a rolling basis. Comparative financial statements are quite useful for the following reasons:

Provides a comparison of an entity's financial performance over multiple periods, so that you can determine trends. The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors.
Provides a comparison of expenses to revenues and the proportions of various items on the balance sheet over multiple periods. This information can be useful for cost management purposes.
May be useful for predicting future performance, though you should rely more on operational indicators and leading indicators than on historical performance for this type of analysis.

Related AccountingTools Course

The Interpretation of Financial Statements

It is customary to issue comparative financial statements with additional columns containing the variance between periods, as well as the percentage change between periods.

The Securities and Exchange Commission requires that a publicly held company use comparative financial statements when reporting to the public on the Form 10-K and Form 10-Q.

Example of Comparative Financial Statements

The following is an example of a balance sheet that is presented on a comparative basis.

ABC International
Balance Sheet

 
as of
12/31/20X3
as of
12/31/20X2
as of
12/31/20X1

Current assets
 
 
 

Cash
$1,200
$900
$750

Accounts receivable
4,800
3,600
3,000

Inventory
3,600
2,700
2,300

Total current assets
$9,600
$7,200
$6,050

Total fixed assets
6,200
5,500
5,000

Total Assets
$15,800
$12,700
$11,050

 
 
 
 

Current liabilities
 
 
 

Accounts payable
$2,400
$1,800
$1,500

Accrued expenses
480
360
300

Short-term debt
800
600
400

Total current liabilities
$3,680
$2,760
$2,200

Long-term debt
9,020
7,740
7,350

Total liabilities
12,700
10,500
9,550

Shareholders’ equity
3,100
2,200
1,500

Total liabilities and equity
$15,800
$12,700
$11,050