Financial statement notes (10) Footnotes
- Provide further details about information summarized in financial statement
- Accounting methods
- Uncertainty of the estimates
- Assumption
- Help users improve assessment amount, timing, uncertainty of the estimates
- Information
- Basis of presentation
- Fiscal period, inclusion of consolidated entities
- Information about accounting methods, assumptions, estimates
- Additional information:
- business acquisition
- disposal
- legal actions
- employee benefits plans
- commitment
- customers
- sales to related parties…
- Basis of presentation
- Main information
- Industry: Segment results
- Commitment and contingency
- Enterprise:Legal proceedings
- Acquisition or divestitures
- Finance: Issuance of stock options
- Employee: benefit plans
Management’s commentary (MD&A) (11)
- One of the most useful sections of financial report
- Address
- Nature of business
- Management objectives
- Resource
- Key relationship of the company
- Risk
- Past performance
- Performance measure used
- In case of US
- Trends and event, uncertainty that affect firm liquidity, capital resource, results of operation
- Discuss
- Effects of inflation, changing price, business trend
- Impact of
- Off-balance-sheet (OBS) (12)
- Debt, asset or financing activity not on the company’s balance sheet
- Contractual obligations
- each party is legally responsible for in a contract agreement.
- Purchase commitment
- Off-balance-sheet (OBS) (12)
- Accounting policy
- include any methods, measurement systems and procedures for presenting disclosures.
- Forward -looking expenditures or future capital need
- Difference between footnotes and MD&A
- MD&A is an explanation of what happened last year (“Our suppliers were on strike, our customers lost their jobs, high interest rates killed us …”) and what they think will happen in the future
- The footnotes explain the numbers in the financial statement.