Original Question: (Do not reply to this one)
List and discuss the types of information commonly disclosed in the footnotes to corporate financial statements. Why are these important to investors and other stakeholders?
Student Discussions:
Reply to each student posts by commenting about their posts and building on the subject (About 100 words each) APA reference.
APA reference. Any sources including, but not limited to:
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2017).Financial accounting theory and analysis: Text and cases(12th ed.). Hoboken, NJ: Wiley.
1-Victoria Martinez
There are a variety of footnotes that can be included in the corporate financial statements, such as Accounting Policies, Schedules and exhibits, explanation of financial statements items, and general information about the company.Within the accounting policies, companies should include their accounting method and explanation of their followed accounting policies.Schedules and exhibits will share information that generally discusses long-term debt, or income tax and their expecting schedule. Within the explanation of financial statements, the company will discuss more detail for items such as pensions, to expand and help the readers understand the financial information that is being shared. General information is a very important footnote to be shared; the firm can discuss economic events or impacting events that may have manipulated the financial position. This allows the firm to communicate directly with the readers to help explain any information that needs to be shared or broken down for the reader.
Footnotes are very important to investors and stakeholders because it allows the company to communicate with the investor and stakeholders by sharing information that may not be easily understood through just numbers. If a company is poorly performing within the numbers, then the company can explain that something has impacted the performance of the company.Footnotes also explain or elaborate on specific items that need further explaining. For example, if there is a long-term debt that is of a large value, a footnote can explain how the debt was originated and how long the debt is expected to be a liability for the company.
References:
Schroeder, R. G., Myrtle, W. C., & Cathey, J. M. (2017). Financial Accounting Theory and Analysis: Text and Cases (12th ed.). Hoboken, NJ: Wiley
2-Travis Hope
The items disclosed in the footnotes of the financial statements are items that could not be included anywhere else within the financial statements, but are still important enough to be mentioned. These items are often the last bits of information added to the financial statements. Subsequent events are one such item added to the footnotes. When a company compiles all of its financial information into the financial statements it often takes weeks or months to complete the task and if a major event takes place during that time period it cannot be included in the statements. Therefore, the event is added to the footnotes in order to disclose the information even though it did not make it into the financial statements themselves. This, of course, is important to financial statement users because it could indicate a positive or negative event that would change the financial statements significantly if included.
Accounting policies and the methods used by the company to implement those policies are another item that must be disclosed in the footnotes. “Because accounting policies have a significant impact on the numbers reported in the financial statements, investors need to know what those policies are so they can draw meaningful comparisons between firms in the same industry or between firms in different industries.” (Schroeder, Myrtle, and Cathey, 2017, pg. 539) Another group of items disclosed in the footnotes are schedules and exhibits detailing long term debt and income tax amount other things. These charts help financial statement users understand future financial transactions the company must make.
References:
Schroeder, R. G., Myrtle, W. C., & Cathey, J. M. (2017).Financial Accounting Theory and Analysis: Text and Cases(12th ed.). Hoboken, NJ: Wiley