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Module Two Short Paper: Footnotes
Charlotte De La Cruz
Southern New Hampshire University
ACC 317: Intermediate Accounting I
Professor Rebecca Ingoglia
July 9, 2023
Module Two Assignment: Footnotes
Footnotes to financial statements is additional information that helps explain how a company reached its financial figures. The figures in financial statements might need additional clarifications due to inconsistencies or irregularities. Additionally, footnotes disclose additional details about a company’s activities, investments, transactions and other items that could impact a company’s performance. A company will also explain what accounting method was used and if
it’s changed from any past practice or should be interpreted differently. Companies know what to
include in footnotes by referring to the International Financial Reporting Standards (IFRS) or Generally accepted accounting principles (GAAP) to determine what information is relevant. Footnotes are important because they provide additional information and number alone cannot explain a company’s story. Many external factors can affect a company’s financial results
and it is important to stay transparent about any changes, risks and uncertainties. Information presented in the core financial statements like the balance sheet, income statement and statement of cash flow often need additional clarification. For example, earnings per share can be calculated with different methods and a company’s earnings can be distorted by GAAP principles. Additionally, footnotes can be used to explain how a value was assessed on a line item, like the method in which depreciation was determined. Financial statements need supplemental information to explain numbers because they help explain the accounting policies adopted by the company as well as the assumptions used to prepare the financial statements. Different companies use footnotes for a variety of purposes, but they are essential when a
company’s goal is to provide additional context and transparency. Three companies that have unique details in their footnotes are Walmart, Alphabet and Tesla.
Walmart
- Their footnotes are very extensive and explain many different aspects of their business. The footnotes speak about different branches and locations, employee benefits, financial risks, products and legal proceedings. This provides a very detailed company story. Alphabet- The footnotes are brief and are more focused on explaining the financial statements. Subjects like gains and losses, resources for cash flow, legal meters and stockholders’ equity are mentioned. The company does not speak about their mission and beliefs, and instead focuses their attention more towards explaining the methods and factors that impacted the preparation of their financial
statements. Tesla- Tesla’s footnotes address their revenue related to vehicle sales, energy and storage. They also address tax incentives, property leases and international tax rates. Tesla’s footnotes provide information on the company’s stock, environmental liabilities and research expenses. Walmart and Tesla’s financial reports are 10K annual reports. These seem to be more in depth by
speaking in detail about subjects that go beyond the financial reports. This information provides an incredible amount of transparency about their goals, operations and commitments. Alphabet’s report is a 10 Q quarterly report. Their footnotes are brief and concentrated on the explanation of the financial statements. Although the amount of information differs with each company, the footnotes help clarify the context of the numbers provided and assist stakeholders and public in understanding the statements better.
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References
Alphabet Inc. (2022). Form 10-K Q1 2022. https://www.sec.gov/ix?doc=/Archives/edgar/data/0001652044/000165204422000029/goog-
20220331.htm#if498f6f02e5a474790944835d386b56b_16.
Investor.gov. (n.d.). Using EDGAR to Research Investments
. https://www.investor.gov/introduction-
investing/getting-started/researching-investments/using-edgar-research-investments. Walmart Inc. (2022). Form 10-K 2022. https://www.sec.gov/ix?doc=/Archives/edgar/data/104169/000010416922000012/wmt-
20220131.htm#i1ba69ebb72ec48f9b754a5e96c4cdf3f_139
.
Tesla Inc. (2021). Form 10-K Q4 2021. https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000095017022000796/tsla-
20211231.htm#consolidated_balance_sheets.
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Under SSARS the hierarchy in terms of the level of service provided and degree of comfort the accountant provides to the user of financial statements is (start with the highest level of service first):
A.
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a INOUS OF ADCOUNTING
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V Draw
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Match the following external users of financial accounting information with the type of decision that user will make with the information
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Question 13 options:
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are the "legal records maintained by the FASB" which can be researched
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Accounting Standards Updates
Financial Accounting Concepts
O FASB Codification
Q Search
O
JA
NEW
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https://www.republictt.com/pdfs/annual-reports/RFHL-Annual-Report-2022.pdf
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