Question

Can companies use parenthetical explanations, notes, cross references, and supporting schedules to disclose pertinent information? can you give me an example?

Answer 1

Yes, companies can use parenthetical explanations, notes, cross references and supporting schedule to disclose pertinent information. Parenthetical explanations give more description following the item without making readers refer the foot notes. For example- Indicating the impact of fair value accounting on the assets held for sale, like: building for sale: historical cost of £200,000; fair value of £250,000. Notes are used when it becomes non-convenient for a company to disclose additional description as parenthetical explanations. For example- Information regarding the use of significant accounting policies while preparing financial statements. Cross references are very much similar to parenthetical explanations except that they are used to refer a direct relationship between two line items of the balance sheet. For example- assets used as collateral for securing long-term debt are cross referenced to the long-term debt line and vice-versa. Supporting schedules are used by the company to give more detailed information rather than the individual summary item as shown in the balance sheet. For example- detailed classification of Property, Plant & Equipment with the objective to breakdown the above information into sub- categories so that the users will be able to understand how accumulated depreciation is applied to each one of them.