B. GENERAL PURPOSE FINANCIAL STATEMENTS - 6. NOTES TO FINANCIAL STATEMENTS

Question 1

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

Six (6) examples:

Answer 1

1. Managements’ Discussion and Analysis (MDA)
2. Significant Accounting Policies
3. Other Disclosures
4. Related party transactions
5. Concentration of credit risk
6. Contingent liabilities

Question 2

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

1. Managements’ Discussion and Analysis:

Answer 2

Managements’ Discussion and Analysis

This is a required part for publicly held companies, it discusses:

• operations,
• liquidity, and
• capital resources.

Question 3

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

2. Significant Accounting Policies

Answer 3

• Significant Accounting Policies

There needs to be disclosures on significant accounting policies and how they are applied. Some of the items should be included if applicable:

• A company’s revenue recognition policies
• How a company determines what investments are cash equivalents
• How a company prices their inventory
• Methods for amortizing intangible

Question 4

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

3. Other Disclosures

Answer 4

Other Disclosures

During times of price instability, a disclosure is required discussing the effects of the instability on the company’s business.

Question 5

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

4. Related party transactions

Answer 5

Related party transactions: Any significant related party information would be discussed in the notes.

Question 6

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

5. Concentration of credit risk

Answer 6

Concentration of credit risk: If a business and most of its customers/suppliers all operate in the same industry, then a concentration of credit risk needs to be disclosed in the notes.

Question 7

_{B. GENERAL PURPOSE FINANCIAL STATEMENTS}

6. NOTES TO FINANCIAL STATEMENTS

Disclosures are a key part of the financial statements in that they provide info about assumptions and estimates.

6. Contingent liabilities

Answer 7

Contingent liabilities: Remember that possible liabilities that are not both probable and can be reasonably estimated (if it was both it would be on the balance sheet) would be discussed in the notes instead being accrued on the balance sheet.