Notes to Financial Statements
Author | Vern Krishna |
Pages | 276-283 |
Chapter 13: Notes to Financial
Statements
A. OVERVIEW
A complete set of nancial statements includes the Notes, which are
a form of accounting footnotes that disclose additional information
about the enterprise. e purpose of the Notes to the nancial state-
ments is to enhance our understanding of the statements and to pro-
vide context and some detail of accounting principles. e theory is
that the Notes should communicate relevant information in a read-
able form to assist the user in analyzing the statements. Unfortunately,
management sometimes uses the Notes to obfuscate, minimize, or
bury important information.
e Notes to the nancial statements are similar to footnotes in
a legal document. ey provide supplemental information to the
reader of the statements and disclose management choices in selecting
between alternative accounting principles and methodologies. Since
accounting involves choices between alternative methods of revealing
nancial information, management should select the method that is
most appropriate to its particular business and operations. e Notes
describe the important accounting policies that management adopts
and, where necessary, explain changes in such policies between suc-
cessive nancial statements.
e Notes contain information on aspects of business operations
that cannot conveniently be disclosed in the body of the nancial
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