Footnotes to the Financial Statements
Candlefocus EditorFootnotes address required audited disclosures, all significant accounting conventions used in the financial statements, and any modifications to such conventions that were made during the reporting period. They also include information regarding upcoming transactions and events that could potentially affect future profitability. Because of this additional information, footnotes can often reveal details and issues within a company’s financial health that otherwise may go unnoticed.
Thus, a careful review of a company’s financial statements is not complete without a thorough examination of the related footnotes. The footnotes are provided in order to give all relevant stakeholders the opportunity to make analysis, review, and comparison of the financial statements, and any meaningful questions or red flags should be immediately pursued and followed-up on.
In addition to investors and financial professionals, other users of financial statements look to the footnotes for information, including regulatory bodies, lenders, creditors, and potential buyers or other stakeholders of the company.
In short, footnotes to the financial statements are an invaluable source of information, and should play an integral role in the evaluation of a company when it comes to financial decision-making. They are essential to a meaningful financial analysis, and should not be neglected.