Condensed financial statements are a summary form of a company's earnings statement, balance sheet, and cash flow statement. These statements are created to provide a quick overview of the company's financial status. Items that would normally receive several line items are condensed into one line, such as cost of goods sold or retained earnings. Disclosures that would be found in full financial statements are eliminated. This view of company financials helps provide an overview of the business structure and income performance. The condensed financial statements must adhere to Generally Accepted Accounting Principles and may at times be provided to interested parties in lieu of full financial statements. The auditing team conducting an audit of the company will usually view condensed financial statements along with full financial statements for a full picture of the company's financial standing.
Breaking Down Condensed Financials
Consolidated financial statements will present the same financial picture of the company as the full financial statements, but items that would normally be several line items in the full version will be condensed down to one line for brevity. For example, the condensed financial statement will only show one line for "total revenue," while the full earnings report will show revenue by operating division, products, services, interest and any other source of revenue.
When examining a condensed set of financials, you should be extra critical when looking at each line item. The lack of detail may make the analysis simpler, but that same lack of detail can mask large fundamental problems within the firm. It may be a good idea to receive a full set of financial statements to review as well, as the full statements will contain disclosures and line items that may have been eliminated from the condensed version.