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What is the Definition of Annual Financial Statements (AFS)?
Annual Financial Statements (AFS) is defined as the end of year report on an entity’s financial performance. Annual Financial statements are prepared on a going concern basis unless management intends to wind up the entity’s operations under the accrual basis of accounting.
The fundamental purpose of financial statements is to provide information to the stakeholders useful for making economic and financial decisions about the business.
The Annual Financial Statements (AFS) comprises of a following reports:-
i. Statement of Financial Position (Formerly known as the Balance Sheet)
ii. Income Statement
iii. Statement of changes in equity
iv. Cash flow statement
v. Notes to the financial statements

i) Statement of Financial Position (formerly known as the Balance Sheet)
The Statement of Financial Position presents the financial position of an entity at a specific point in time. Accordingly, IAS 1 “Presentation of Financial Statements” requires the presence of the following items on the face of the balance sheet as a minimum requirement:-
• Assets: Including Non-Current Assets such as property, plant and equipment, intangible assets, financial assets, assets held for sale, deferred tax asset, and current assets such as inventory, receivables, cash, and cash equivalents.

• Liabilities: Including financial liabilities, deferred tax liability, and current liabilities such as trade payables and provisions.

• Equity: Including share capital, retained earnings, and minority interest.

ii) Income Statement
The income statement is prepared to report the entity’s financial performance during the financial year. The accounting could be the calendar year or fiscal year, depending upon the accounting policy followed by the entity.

iii) Statement of changes in equity
A statement of changes in equity (also referred to as statement of retained earnings) is a business' financial statement that measures the changes in owners' equity throughout a specific accounting period. The statement of changes in equity:-
 The amount of profit and loss attributable to the shareholders.
 Transactions made with equity shareholders include the issue of new shares, the amount of dividend paid, and the balance of the reserves and surplus.
 The corrections made concerning errors made in the past.
 In the case of any changes made in accounting policies, the disclosure about the effect of the change on financial statements.

iv) Cash Flow Statements
All entities that prepare their annual financial statements in line with International Financial Reporting Standards (IFRS) or International Accounting Standard (IAS) must present the Cash Flow Statement as part of Annual Financial Statements. The Cash Flow Statement reports the changes in the cash and cash equivalents during the year due to operational, financing, and investing activities.

v) Notes to the Annual Financial Statements (AFS)
Notes to the financial statements are an integral part of financial statements and include:-
 Specific policies are used as per Generally Accepted Accounting Policy/International Financial Reporting Standards (IFRS).
 Accounting estimates.
 Details of all the amounts disclosed on the face of the Balance Sheet and Income Statements.

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