Which of the following should be disclosed in the notes to the financial statements?
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Footnotes to the financial statements refer to additional information that helps explain how a company arrived at its financial statement figures. They also help to explain any irregularities or perceived inconsistencies in year to year account methodologies. It functions as a supplement, providing clarity to those who require it without having the information placed in the body of the statement. Nevertheless, the information included in the footnotes is often important, and it may reveal underlying issues with a company's financial health. Show
Key Takeaways
Footnotes To The Financial StatementsUnderstanding Footnotes to the Financial StatementsFootnotes to the financial statements serve as a way for a company to provide additional explanations for various portions of their financial statements. Footnotes to the financial statements thus report the details and additional information that is left out of the main financial statements such as the balance sheet, income statement, and cash flow statement. This is done mainly for the sake of clarity because these notes can be quite long, and if they were included in the main text they would cloud the data reported in the financial statement. Using footnotes allows the general flow of a document to remain appropriate by providing a way for the reader to access additional information if they feel it is necessary. It allows an easily accessible place for complex definitions or calculations to be explained should a reader desire additional information. It is important for analysts and investors to read the footnotes to the financial statements included in a company's interim and annual reports. These notes contain important information on items such as the accounting methodologies used for recording and reporting transactions, pension plan details, and stock option compensation information—all of which can have material effects on the bottom-line return that a shareholder can expect from an investment in a company. Footnotes also explain in detail why any irregular or unusual activities such as a one-time expense has occurred and what its impact may be on future profitability. These are also sometimes called explanatory notes. Types of Footnotes to the Financial StatementsFootnotes may provide additional information used to clarify various points. This can include further details about items used as a reference, clarification of any applicable policies, a variety of required disclosures, or adjustments made to certain figures. While much of the information may be considered required in nature, providing all the information within the body of the statement may overwhelm the document, making it more difficult to read and interpret by those who receive them. Importantly, a company will state the accounting methodology used, if it has changed in any meaningful way from past practice, and whether any items should be interpreted in any way other than what is conventional. For example, footnotes will explain how a company calculated its earnings per share (EPS), how it counted diluted shares, and how it counted shares outstanding. Often, the footnotes will be used to explain how a particular value was assessed on a specific line item. This can include issues such as depreciation or any incident where an estimate of future financial outcomes had to be determined. Footnotes may also include information regarding future activities that are anticipated to have a notable impact on the business or its activities. Often, these will refer to large-scale events, both positive and negative. For example, descriptions of upcoming new product releases may be included, as well as issues about a potential product recall. and unreserved statement of suchcompliance in the notes.III.Inappropriate accounting treatment may berectified either by disclosure of accountingpolicies or by notes or explanatory material. Get answer to your question and much more 43.Financial statements achieved fair presentation whena.The PFRS issued by FRSC are appropriatelyapplied with additional disclosures whennecessary.b.Inappropriate accounting treatments arecorrected rectified through disclosures.c.They comply with majority of the requirementsof each applicable PFRS and each applicableinterpretations.d.All of the above. 44.Which of the following statement is (are) true?I.When preparing financial statements,management is required to make anassessment of an enterprise’s ability tocontinue as a going concern which should beat least five years from the balance sheetdateII.When the financial statements are notprepared on a going concern basis, this factshould be disclosed. Get answer to your question and much more 45.Under the accrual basis of accounting, the effects ofthe transactions and other events are Get answer to your question and much more What information is provided in the notes to financial statements?Introduction. The notes to the financial statements communicate information necessary for a fair presentation of financial position and results of operations that is not readily apparent from, or not included in, the financial statements themselves.
What should be shown as first item in notes to financial statements?The first note to the financial statements is usually a summary of the company's significant accounting policies for the use of estimates, revenue recognition, inventories, property and equipment, goodwill and other intangible assets, fair value measurement, discontinued operations, foreign currency translation, ...
Which of the following is not information to be disclosed in financial statements?AS-6 deals with depreciation of the tangible asset. Hence, only the historical cost, accumulated depreciation on the asset and total depreciation for the period for each class of asset will be recorded. Depreciable value of asset is not to be disclosed according to AS-6.
What are the disclosure notes?Note Disclosures—Project Plan. Background: Note disclosures represent a fundamental component of the information that financial statement users rely on to make decisions related to a government's financial health, as well as to assess whether governments have been fiscally and operationally accountable.
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