Accounting Standard Footnotes
There are many examples of standard footnotes in accounting and they vary based on the needs of the accountant making the financial statement preparation. Below are some examples to benefit a statement preparer.
"Matching principal of GAAP not yet implemented as it relates to revenue & COGS" means that there is a timing mismatch of the revenue recognition and offsetting cost of good recognition stemming usually from expensing the cost of product on purchase and not maintaining sufficient backup for inventory tracking purposes.
"No labor COGS recorded against service revenue" means that the portion of direct and indirect labor applicable to the cost of product is being expensed directly with wages expense.
"Based on operating expense analysis, some costs are still reflected under cash basis" means that there is expenses being recorded as they are paid for rather than when the associated economic value is derived.
Financial Statement Footnote Categories
In addition to standard footnotes there are many other possible examples . The number of possible footnote disclosures is extremely long so the best way to express possible footnotes is by relevant categories. The following list touches upon the more common footnotes, and is by no means comprehensive.
Accounting policies. Describe significant principles followed.
Accounting changes. The nature and justification of a change in accounting principle, and the effect of the change.
Related parties. The nature of the relationship with a related party, and the amounts due to or from the other party.
Contingencies and commitments. Describe the nature of any reasonably possible losses, and any guarantees, including maximum liabilities.
Risks and uncertainties. Note the use of significant estimates in accounting transactions, as well as various business vulnerabilities.
Nonmonetary transactions. Describe nonmonetary transactions and any resulting gains or losses.
Subsequent events. Disclose the nature of subsequent events and estimate their financial effect.
Business combinations. Describe the type of combination, the reason for it, the payment price, liabilities assumed, goodwill incurred, acquisition-related costs, and many other factors.
Fair value. Disclose the amount of fair value measurements, the reasons for the fair value election (if applicable), and various reconciliations.
Cash. Note any uninsured cash balances.
Receivables. Note the carrying amount of any financial instruments that are used as collateral for borrowings, and concentrations of credit risk.
Investments. Note the fair value and unrealized gains and unrealized losses on investments.
Inventories. Describe any cost flow assumptions used, as well as any lower of cost or market losses.
Fixed assets. Note the methods of depreciation used, the amount of capitalized interest, asset retirement obligations, and impairments.
Goodwill and intangibles. Reconcile any changes in goodwill during the period, and any impairment losses.
Liabilities. Described larger accrued liabilities.
Debt. Describe loans payable, interest rates, and maturities occurring over the next five years.
Pensions. Reconcile various elements of the company pension plan during the period, and describe investment policies.
Leases. Itemize future minimum lease payments.
Stockholders' equity. Describe the terms of any convertible equity, dividends in arrears, and reconcile changes in equity during the period.
Segment data. Identify company segments and the operational results of each one.
Revenue recognition. Note the company's revenue recognition policies.
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