Comprehensive Financial Statement Analysis: Maine's 2018 Report

This report conducts a detailed financial statement analysis of the State of Maine's Comprehensive Annual Report for the fiscal year 2018. It begins with an executive summary and then examines the auditor's opinion, accounting treatments, and management's discussion. The report delves into the notes to the financial statements, highlighting key accounting principles and policies, and provides a ratio analysis to assess the state's liquidity, solvency, profitability, and sustainability. The analysis compares these ratios to benchmarks to gauge the state's fiscal health. Furthermore, the report explores the management's discussion section, outlining the state's financial performance across governmental and business-type activities. The report concludes with a reflective overview of the financial statement analysis process, emphasizing the importance of financial statements in expressing an organization's fiscal position and performance, particularly in the context of governmental entities.

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
Name of the Student:
Name of the university:
Author’s Note:

1FINANCIAL STATEMENT ANALYSIS
Executive Summary:
This report aims at analyzing the State of Maine Comprehensive Annual Report for the fiscal
year ending 2018 and understanding various aspect of the statement including independence
auditor’s opinion on the statement. It furthers analyses the Accounting treatments and
procedures of the State of Maine and the management’s discussion on the financial statement.
For better understanding of the process, a ratio analysis has been performed in this report and
it concludes with the reflective on the financial statement analysis process on the State of
Maine’s financial statement.

2FINANCIAL STATEMENT ANALYSIS
Table of Contents
Introduction:...............................................................................................................................3
Part 1:.........................................................................................................................................3
Part 2:.........................................................................................................................................4
Part 3:.........................................................................................................................................5
Part 4:.........................................................................................................................................6
Part 5:.........................................................................................................................................7
References and bibliography:.....................................................................................................8

3FINANCIAL STATEMENT ANALYSIS
Introduction:
Maine is a northeastern US State known for its maritime history and its rocky
coastline. The Government of the State of Maine is responsible for all the government funds
and their utilization. They have some business and non business activities during the fiscal
years. In this report their information related to their business and non business activities
have been analyzed from their 2018 fiscal year Comprehensive Annual Financial Report1.
Part 1:
Their comprehensive annual financial report has been audited by the Pola A, Bucldey,
CPA, CISA State auditor. The main purpose of audit as can be derived from its definition is
to make opinion about the true and fair view of the financial records and financial statement
of any organization. Like the same, in the independence auditor’s report in the State of Main
Comprehensive Financial Annual Report for the fiscal year ended 2018, the auditor have
expressed his opinion about the true and fairness of the financial statement of the State of
Maine. He expressed and certified the correctness of the areas of financial affairs which is
covered under his audit. The scope of the audit has been explained in the auditor’s
responsibility part of the auditor’s report2.
Therefore it can be concluded that, the auditor mainly focused and commented on the
presentation of the financial report rather than the financial health of the State of Maine. The
auditor has emphasized certain facts which need concentration and for rest of the part he has
expressed its fair presentation.
1 Chen, Yimiao, et al. "GAAP difference or accounting fraud? Evidence from Chinese reverse mergers delisted
from US markets." Journal of Forensic and Investigative Accounting 7 (2015): 122-145.
2 (State of Maine Comprehensive Financial Annual Report 2018)

4FINANCIAL STATEMENT ANALYSIS
Part 2:
Notes to the financial statement are the integral part of the financial statement. It helps
in understanding the presentation and parts of the financial reports. It explains every
movement in the key financial factors and parameters in details which are not shown in the
financial statement. It is not always possible to present every breakup of the financial
parameter in the main financial statement. To help in understanding and interpreting the
financial statement, notes are added to it explaining all those points which need detailed
break up and sub divisions.
It is important to disclose the key accounting principles and policies which have been
used for the accounting and reporting in the financial statement. It helps a user of information
to understand the basis of valuations and transactions. In the first part of the notes to the
financial statement of State of Maine’s annual report they have disclosed all those accounting
principles, concepts and policies which they have used for their accounting. Proceeding from
there, they have added in details all the funds related accountings, assets and depreciation,
insurances, related party transactions, deferred tax calculations and commitments and
contingencies. They have also included a state budget in it. They have presented all those
material information which are essential for understanding their financial statement3.
In my opinion, without notes to the financial statement, key financial parameters
could not have been explained properly. The meaningfulness of financial statement and
report depends largely of the proper notes to the financial statement explaining every
complex items and term is the financial statement. A reader of the statement can easily
understand the result and financial position of an organization if it has been well supported by
the notes to the financial statement. Lastly it can be concluded that, it increases the
transparency, accuracy and meaningfulness of a financial report.
3 (State of Maine Comprehensive Financial Annual Report 2018)

5FINANCIAL STATEMENT ANALYSIS
Part 3:
Based on the available information in the State of Maine Comprehensive Financial
Annual Report for the fiscal year ended 2018, following ratios can be computed.
Ratio Analysis
Liquidity
Current Assets 2781692
Current Liabilities 1244777
Current Ratio 2.23
Solvency
Total Liabilities 7001417
Total Assets 7375990
Debt to Assets 0.95
Profitability
Surplus 385715
Operating Revenues 4277285
Profit margin Ratio 0.09
Sustainability
Expendable Net Position 696010
Total Operating Expenses 3891570
Primary Reserve Ratio 0.18
Comparing the above results with the standards, the financial and fiscal health of the
State of Maine can be analyzed. In terms of Liquidity they are having a good mark as their
current ratio is 2.23 which is much above the benchmark of 1. In terms of solvency, they are
having a poor strength as their solvency ratio is 0.95 which is greater than the benchmark of
0.6. Almost 95% of their assets are backed by debts. As it is a government body any amount
of surplus is acceptable, in terms of profitability they have managed to make a net surplus
over the fiscal year’s activities. Sustainability focuses on the long term aspect, it emphasizes
on reserves mostly, in this parameter, their performance is below the bench mark of 0.40,
they are having only a 0.18 of primary reserve ratio.

6FINANCIAL STATEMENT ANALYSIS
Part 4:
In the management discussion part of the financial statement, the management
explains and expresses their views and thoughts about the performance of the organization as
a whole. In the management discussion part of the State of Maine Comprehensive Financial
Annual Report for the fiscal year 2018, the State has included their discussion about the fiscal
performance of the state. They have started with some key financial highlights of the state.
They have divided and discussed the performance of the state dividing it into three sections
Government wide, Fund Level and Long term Debt4.
They have reported an increase in the net position of government activities by and
amount of $344.8 million and $40.9 million in the business type activates. They have
reported a combined ending Fund balance of $1.1 billion and an increase by $110.3 million
amount from the previous year. They also have reported a decrease in total debt or liability by
an amount of $88.4 million. Further they have explained the fiscal difficulties and
opportunities which they have come across through the fiscal year5. They have explained
what treatments have been made with the fund balances and fund transactions, and business
type activities.
All the financial performance and position have been presented classifying them in to
various levels mainly in Governmental activities and Business type activities. It can be
observed from their discussion in this part that, they have increased their business type
activities and made a huge increase in their revenues and, but their increased spending in
various governmental activities, compensated their surplus from the business type activities.
Business type activities mainly includes the earning or revenue sources from where the
government earns major revenues, and the governmental activities are those areas in which
4 (State of Maine Comprehensive Financial Annual Report 2018)
5 (State of Maine Comprehensive Financial Annual Report 2018)

7FINANCIAL STATEMENT ANALYSIS
government funds various activities and developments for the society6. It can be observed
from their discussion and analysis that, they are having an overall good health in their fiscal
performance and financial positions, though they are having a huge amount of debt, they are
trying to pay it off utilizing the earnings from their business type activities7.
Part 5:
From the above analysis and discussion, it can be learned and understood that, the
financial statement is a tool for expressing the financial performance and position of an
organization. Financial statement for a business organization is different from the financial
statement of a Government body. Government financial statement of annual reports presents
the fiscal health and position of a state as a whole. It includes government funds and budgets.
From the above analysis of State of Maine’s annual report all those aspects can be understood
well.
6 Granof, Michael H., et al. Government and Not-for-Profit Accounting, Binder Ready Version: Concepts and
Practices. John Wiley & Sons, 2016.
7 Granof, Michael H., et al. Government and Not-for-Profit Accounting, Binder Ready Version: Concepts and
Practices. John Wiley & Sons, 2016.

8FINANCIAL STATEMENT ANALYSIS
References and bibliography:
Biondi, Lucia, and Irvine Lapsley. "Accounting, transparency and governance: the heritage
assets problem." Qualitative Research in Accounting & Management 11.2 (2014): 146-164.
Chen, Yimiao, et al. "GAAP difference or accounting fraud? Evidence from Chinese reverse
mergers delisted from US markets." Journal of Forensic and Investigative Accounting 7
(2015): 122-145.
Granof, Michael H., et al. Government and Not-for-Profit Accounting, Binder Ready Version:
Concepts and Practices. John Wiley & Sons, 2016.
Granof, Michael H., et al. Government and Not-for-Profit Accounting, Binder Ready Version:
Concepts and Practices. John Wiley & Sons, 2016.
Hassan, Enas A., Michaela Rankin, and Wei Lu. "The development of accounting regulation
in Iraq and the IFRS adoption decision: an institutional perspective." The International
Journal of Accounting 49.3 (2014): 371-390.
Khumawala, Saleha, Justin Marlowe, and Daniel Gordon Neely. "Accounting
professionalism and local government GAAP adoption: A national study." Journal of Public
Budgeting, Accounting & Financial Management 26.2 (2014): 292-312.
Snow, Neal M., and Jacqueline L. Reck. "Developing a government reporting
taxonomy." Journal of Information Systems 30.2 (2016): 49-81.
State of Maine Comprehensive Financial Annual Report 2018. State Of Maine
Comprehensive Financial Annual Report 2018. Maine, US: State of Maine, 2018. Web. 8
May 2019.