Financial statement notes
· Financial footnote is required by GAAP or SEC
· Allow users to improve assessment of the amount, timing & uncertainties of the estimates reported in financial statements
· Audited
· Additional information often relating to contingent loss.
Included in the footnotes are the following:
A summary of significant accounting policies such as:
· The revenues-recognition method used
· Depreciation methods and rates
· Balance sheet and income statement breakdown of items such as:
- Marketable securities
- Significant customers (percentage of customers that represent a significant portion of revenues)
- Sales per regions
- Inventory
- Fixed assets and Liabilities (including depreciation, inventory, accounts receivable, income taxes, credit facility and long-term debt, pension liabilities or assets, contingent losses (lawsuits), hedging policy, stock option plans and capital structure).
Supplementary information
· Not audited
· Contain additional information, for example:
- operating income or sales by region or business segment
- reserve for an oil and gas company
- information about hedging activities and financial instruments
Management’s discussion and analysis (MD&A)
· required by SEC
· provide assessement of financial performance & condition of a firm
· require to discuss:
- result of operation-sales & expense trend
- capital resoruces & liquidity-cash flow trend
- general business overview based on known trends
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