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What Are Footnotes? Pick up any financial report and you'll always find references to the footnotes of the financial statements. The footnotes describe in detail the practices and reporting policies of the company's accounting methods and disclose additional information that can't be shown in the statements themselves.

The exact nature of these footnotes varies, depending upon the accounting framework used to construct the financial statements (such as GAAP or IFRS). Footnotes are an integral part of the financial statements, so you must issue them to users along with the financial statements.

By consulting either generally accepted accounting principles (GAAP) or International Financial Reporting Standards, businesses are able to determine what kinds of information should be included in the footnotes of their financial statements (IFRS).

Footnotes to the financial statements refer to additional information that helps explain how a company arrived at its financial statement figures. They also help to explain any irregularities or perceived inconsistencies in year to year account methodologies.

Footnotes are an essential part of any financial statement. However, they come with a few disadvantages. Footnotes are required only to the point ?beyond the legal minimum? to protect the company from liability.

The summary of significant accounting policies is a section of the footnotes that accompany an entity's financial statements, describing the key policies being followed by the accounting department. This summary is usually placed at or near the beginning of the footnotes.

The footnotes to your company's financial statements give investors and lenders insight into account balances, accounting practices and potential risk factors ? knowledge that's vital to making well-informed business and investment decisions.

[The information given in a footnote includes the author, the title, the place of publication, the publisher, the date of publication and the page or pages on which the quotation or information is found.]

The following three major financial statements are required under GAAP: The income statement. The balance sheet. The cash flow statement.

Full disclosure principle Accounting professionals use footnotes on financial statements to provide this information and to describe the company's policies for recording and reporting business transactions.