What are external financial statements?

Definition of External Financial Statements

External financial statements are those distributed outside of the company's management. Some of the recipients of the external financial statements include the following:

  • Current investors and lenders
  • Potential investors and lenders
  • Financial analysts
  • Credit rating organizations
  • Some customers and suppliers
  • Government agencies

Since the external financial statements are likely to be compared to those of other corporations (and to the corporation's previously issued financial statements), it is imperative that common rules be followed. In the U.S., the common rules are known as generally accepted accounting principles (GAAP), which are established by the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC).

Examples of External Financial Statements

The external financial statements of a U.S. corporation consist of a complete set of the following:

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