NOTES ON ACCOUNTS

PRASHANTA SHARMA
 Definition
• The notes to the accounts are a
series of notes that are referred to in
the main body of the financial
statements. The notes give further
details on the numbers given in
the accounts.
Concept of “Notes to the Account”
• Generally, the notes are the main method for a company
to comply with the full disclosure principle

• The notes to the financial statements are a required,

integral part of a company's external financial
statements. They are required since not all relevant
financial information can be communicated through the
amounts shown (or not shown) on the face of the
financial statements. The notes are also referred to
as footnote disclosures.
Concept of “Notes to the Account”
• Notes to accounts help Users of Accounting Information to
understand the current financial position of a company
and act as a support for its estimated future performance.

• It acts as supplementary information furnished along with

the final accounts of a company and may be tremendous in
size depending on the company, accounting framework
and nature of the business. The information
supplied depends on the accounting standards used such
as IFRS or GAAP.
•
 Notes to Accounts
• In addition to the amounts that are reported
on the face of the financial statements,
US GAAP requires that additional information
be provided as notes to the financial
statements. To alert the readers of these
important disclosures, each financial
statement is required to make reference to
them.
 Examples of “Notes to the Account”
• 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, recently issued accounting
pronouncements, and others
Examples of “Notes to the Account
• The remaining notes contain the details (including
schedules of amounts) for items such as
inventories, accrued liabilities, income taxes, employee
benefit plans, leases, business segment information, fair
value measurements, derivative instruments and
hedging, stock options, commitments and
contingencies, and more.

• Each external financial statement should also include a

reference to the notes, such as: The accompanying notes
are an integral part of the financial statements.