Question

In the preparation of fund financial statements, why the notes to financial statements are interesting?

Answer 1

Answer Notes to financial statements,also known as footnotes are crucial to the users and readers of financial statements apart from just number based income statement,balance sheet and statement of equity.

Notes to financial statements depends entirely on what accounting principles are followed by the company (GAAP or IFRS).

The financial statements might not be easier or interesting for the different users to see and understand but the separate notes on each individual section can be of more relevance and interest to the users.For example a shareholder might be interested to know how much dividend is declared can straightaway go to the dividend section.An auditor can read about the changes in accounting policies or accounting methods like change in inventory valuation or changes in depreciation method.

It helps the shareholders to see the current position of the company and by that they can project the future as well.They get to understand the risk and uncertainties involved,what are the related parties,transactions with them during the year,debts involved,any pending lawsuits which company has.Hence it ease the shareholder to understand the financial position and stability of the company.

These information given in the footnotes are also important for the auditors to form opinion on financial statements of the company.These provide additional information on various matters for even better clarity and explanation.

Thus apart from numeric financial statements the foot notes work as an explanatory notes for the readers and users of financial statements.