Purpose of Notes to Financial Statements

There are some transactions that cannot be understand by merely looking on the Balance Sheet and Income Statement alone. Because of this, companies preparing financial statements must also includes disclosure of these transactions for users to easily understand the effects of these particular transactions. These Disclosures are called notes to financial statements.

What is the purpose of Notes to Financial Statement

The purpose of the notes to financial statements is "to provide necessary information or disclosures required by the reporting standards to help users of the financial statements to understand the effects of some transactions that cannot be understood by merely looking on the physical report".

Accordingly, the notes to financial statements shall present the basis of the preparation of the financial statements, disclose information not reported elsewhere in the financial statements, and information that is necessary to the fair presentation of the report. 

Order of Notes to Financial Statements

• Statement of Compliance with Financial Reporting Standards
• Summary of significant accounting policies
• Supporting computation for the items of financial statements; and
• Other disclosures, necessary to the fair presentation of the financial statements.

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