Notes to the financial statements
Notes to Financial Statements
In one sentencePages attached to the financial statements that explain the accounting policies and detail the item figures and significant estimates; they are an integral part of the statements.
Simply put
The financial statements give you summarized figures, and the notes tell you what lies behind them: how inventory was measured, the details of loans and their repayment dates, and the lawsuits pending against the business.
Whoever reads the statements without the notes sees half the picture. That is why the note number that explains each item is usually shown next to it in the statement.
Example
Next to the inventory item in a pharmacy's statement of financial position is "Note 6". In the note it states that it measures inventory at weighted average cost, splits the balance between medicines and supplies, and states the value written down for items close to expiry.
Don't confuse it with
DisclosureDisclosure is the principle (showing important information), and the notes are where most disclosure takes place.