Notes and Disclosures
Notes to the financial statement present all such information which cannot be presented on the face of income statement, balance sheet, statement of cash flows and statement of changes in equity.
Typical notes to the financial statement are:
- An introduction of the business outlining its legal status, its country of incorporation and the name of its parents if any and a statement about the company's areas of business and its operations.
- A summary of accounting policies related to revenue recognition, inventories, property, plant and equipment, financial instruments, etc.
- A schedule of property plant and equipment showing the addition and deletion of assets, related movement in the accumulated depreciation account and book value.
- A breakup of cost of sales, selling expenses and administrative expenses.
- A detailed disclosure of different classes of financial instruments and their related risks.
- A breakup of the gross amounts and present values of lease obligations of the business.
- A detail of transactions with related parties.
- A detail of contingencies that may affect the business in future, for example legal proceedings against the business.
- A description of major events that occurred after the balance sheet date, etc.
Written by Obaidullah Jan, ACA, CFAhire me at