Question

How many financial statements must a public firm report? Explain the linkage between these financial statements, and the sequence on how to put them together. In addition, why are footnotes so important in the financial report? Give one example to illustrate your points.

Answer 1

The public companies in US are asked to report and fill form 10-K , the report provide complete detail about the wealth information of company . under item -8 of part II of the form , companies are asked to produce their Financial Statements and Supplementary Data, an audited financial statements, includes income statement, balance sheets, statement of cash flows and statement of stockholders’ equity. Along with notes to explain the information presented in the financial statements.

These statements and accounts are said to be a analysis statement for company annual financial performance . Like income satement provided the operation efficiency , balance provide networth of company , and cash flow and statement of stockholders’ equity provide the actual cash position and benefit to the shareholders.

Footnotes are additional information provided to reader or user of financial statement to support the calculation and to explain any irregularities/ inconsistencies. Some time , these information provides some additional and important information in detail to shareholders and stake holders.Footnotes may use to explain future activities in advance.

For example :

Footnotes to provide ,addition valuation of old asset as per replacement rule.