Footnotes in Financial Statements Research Paper

Footnotes in Financial Statements - Research Paper Example The last section of the financial statements consists of the footnotes and consists of information such as the policies and methodologies used in the preparation of the financial statement. In the simplest sense, the information in the footnotes is an extension of financial statement. It contains quality information that might be useful in understanding the financial position of the company. The footnotes can be divided into two section based on the content in it. One is about the accounting methodologies that are used in the preparation of the report. Second is the detailed explanation of the financial and operational reports. The information about the accounting policies of a company is identified and elaborately explained in the first section. There are numerous parts to this section that addresses different aspects such as inventory, revenue, etc. The policies with respect to these different aspects are discussed in this section. The determination of value of these different aspects is also discussed in this section(Tracy, 2009). There are numerous aspects of a business that cannot be easily understood such as when a company books a sale or revenue determination process. The understanding of these processes is very important to understand the information provided in the report. The information about these processes, mainly the revenue section, is provided in the footnotes. The revenue recognition and revenue determination process is addressed in the footnotes of a financial report. Hence the understanding of such methodologies and policies is only possible with the help of the information in the footnotes. The information in the footnotes is very valuable from an investor’s perspective as it can provide valuable information about the financial structure of the company. Facts that cannot be easily grasped from the main report can be understood by analyzing the accounting methods used. The analysis and comparison of the accounting