Financial statements are the formal accounting documents presenting a company's financial position (balance sheet), performance (income statement), cash generation (cash flow statement) and equity changes. Under IFRS, they also include the notes to the accounts. In financial due diligence, analysing 3 to 5 years of historical financial statements is the starting point for any earnings quality assessment. Their reliability depends on the level of external verification: full audit vs. review vs. compilation vs. no external control. In Switzerland, the level of statutory audit (ordinary control vs. restricted review vs. waiver) directly signals the financial statement reliability.

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Example: due diligence on a Franco-Swiss group reveals an unexplained CHF 3.2 million increase in intangible assets between years N-2 and N-1 in the consolidated IFRS accounts — not explained by an acquisition. Investigation confirms inappropriate capitalisation of internal development costs that artificially inflated assets and reduced reported expenses, requiring a CHF 2.7 million restatement that reduces normalised EBITDA and directly impacts the valuation.

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Hectelion critically analyses financial statements across multiple periods as the foundation of every due diligence and valuation engagement.