Financial Statement
Synonyms: Financial Reports، Accounting Statements، Annual Statements، Audited Statements
Last updated: 2026-05-07
Short Definition
Accounting reports showing financial position of property or office, including balance sheet, income statement, and cash flows, basis of decisions.
Overview
Legal Basis
Financial statements are based on International Financial Reporting Standards (IFRS) and SOCPA standards adopted in Saudi Arabia. For listed joint-stock companies, subject to Capital Market Authority (CMA) regulations on disclosure. For large unlisted entities, ZATCA requires keeping accounting books per standards. For licensed real estate offices, REGA requires submitting financial statements in annual Fal license renewal. Statement audit is mandatory for entities whose revenues exceed SAR 50 million or assets SAR 100 million, by SOCPA-approved accounting offices.
Practical Example
Al-Abraj Real Estate company prepares its 2025 financial statements. Income Statement shows: rental revenues SAR 8,500,000, operating expenses SAR 2,400,000, administrative expenses SAR 800,000, debt service SAR 1,200,000, net profit before tax SAR 4,100,000, Zakat (2.5%) SAR 102,500, net profit SAR 3,997,500. Balance Sheet on December 31: assets SAR 65,000,000 (SAR 45,000,000 investment properties + SAR 5,000,000 development properties + SAR 8,000,000 cash + SAR 7,000,000 receivables), liabilities SAR 35,000,000 (SAR 28,000,000 bank loans + SAR 5,000,000 payables + SAR 2,000,000 provisions), equity SAR 30,000,000. Cash Flow Statement shows positive operating flow SAR 4,800,000, negative investing -SAR 2,500,000 (new property purchase), negative financing -SAR 1,800,000 (loan repayment). Net change in cash +SAR 500,000. A certified accounting office audits statements and issues approval certificate, submitted to ZATCA, banks, and shareholders.
Common Mistakes
- ✗Neglecting financial statement preparation for individual properties — even individuals need them to track their investments.
- ✗Mixing financial statements with bank statements — bank statements are only part of cash flow statement.
- ✗Assuming income statement profit = available cash — profit may be accounting and cash flow different.
- ✗Not reviewing statements from independent party — for large entities, external audit is necessary for credibility.
- ✗Overlooking disclosures in financial statements — disclosures explain numbers and give full context.
International Differences
Financial statements are global standards unified by IFRS. In the UAE, same standards with DFSA and ADGM oversight. In Turkey, TFRS (Turkish Standard) aligns with IFRS with modifications. In Egypt, Egyptian Accounting Standards close to IFRS. In the UK, UK GAAP or IFRS for listed companies. In the US, US GAAP differs relatively from IFRS, with unification efforts. The Saudi advantage in financial statements is full IFRS application since 2017 (most adopted in the region), electronic integration with ZATCA for statement submission, clear SOCPA specialization in oversight, and low accounting costs compared to advanced markets (facilitating entity compliance).