Financial Statements Footnotes

Notes to Financial Statements

The credit and overdraft facilities in use by the company’s European subsidiaries as of December 31, 1998 and 1997, other than the Senior or Revolving Credit Facilities, bear interest at rates between 3.0% and 6.4% per annum. In addition, the Senior Credit Facility is subject to a commitment fee ranging from 0.23% to 0.50% per annum of the total facility. As of December 31, 1998, the company had an interest rate cap agreement outstanding which covers a notional amount of $50,000 of the variable rate Senior Credit Facility providing a maximum fixed rate of 5.5%. The cost of the interest rate cap is being amortized to interest expense over the term of the contract and the unamortized amount approximated fair value at December 31, 1998.

  • Specific instructions accompanying each statement and schedule identify which, if any, details are optional.
  • As discussed in Note 9, Hexcel has various financial and other relationships with CSC.
  • At the very least, the explanatory notes should include what depreciation methods are in use, how a company values its ending inventory, the basis of consolidation, accounting for income taxes, information about employee benefits, and accounting for intangibles.
  • A detailed discussion is made on items exhibited in the balance sheet, income statement, cash flow, and statement of changing capital.
  • While a company’s financial statements contain all the relevant financial data about the company, that data is often in need of further explanation.
  • Sales of our nonalcoholic ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters accounting for the highest sales volumes.
  • To determine if an activity should be reported in a fiduciary custodial fund see BARS Manual 4.3.14, Determining Fiduciary Activities to be Reported in Custodial Funds.

The acquisition was substantially downsized from the original agreement whereby the company had, subject to certain terms and conditions, committed to purchase selected assets and businesses of Fiberite for approximately $300,000. As a result of the downsized transaction, the company wrote-off $4,973 of acquisition and financing costs to business acquisition and consolidation expenses in 1997. In addition, the company expensed $8,000 of acquired in-process research and technology purchased from Fiberite which is also included in the 1997 business acquisition and consolidation expenses. The company periodically reviews the recoverability of all long-term assets, including the related amortization period, whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable.

Reporting Requirements For Annual Financial Reports Of State Agencies And Universities

As such, you cannot gain a full overview of a company with just one type of statement. You must consolidate the data from one statement with the data from another statement to gain a deeper understanding of your company’s financial health.

Notes to Financial Statements

Notes to the financial statements are to be presented in order so that relationships among income statements, balance sheets, and cash flow are indicated. Since companies use the balance sheet to determine the total economic value added by their company’s operations. A financial disclosure is necessary to explain why the insurance contract was modified and what current or future implications may occur. Examples of insurance contracts include the business owner’s life insurance policy or the general liability insurance for business operations.

One resource the auditor will use are the notes to the financial statements. For this reason, the information in the footnotes is just as important as the information contained within the statements, particularly from a regulatory perspective. If the financial statements are error free, but there are errors within the notes, the auditor should issue negative remarks. Financial statement footnotes are also known as notes to the financial statements and notes to accounts. It specifies the accounting policies used while constructing the financial statements like depreciation method, inventory valuation method, etc. The ninth type of note that may be found on the financial statements lists any contingent liabilities that may exist. A contingent liability is a liability that has not yet occurred, but the conditions are favorable for it to occur in the near future.

Types Of Footnotes To The Financial Statements

In the footnotes the company makes several important disclosures about accounting methods, valuation, excluded liabilities, assumptions made and a variety of other important issues. The income statement, which is sometimes called the statement of earnings or statement of operations, lists all revenue and expense account balances and shows the company’s net income or net loss for a particular period of time. This statement may be prepared using a single‐step or multiple‐step format.

Note the carrying amount of any financial instruments that are used as collateral for borrowings, and concentrations of credit risk. Note the use of significant estimates in accounting transactions, as well as various business vulnerabilities. Above is not an exclusive list of notes; there can be notes on the following depending on the company and its business. The primary information about each loan, like interest rates, maturities over the next 5 years, etc., are given here.

The blocked spot indicates the schedule is not required for that government type. Operating budget – Presents the estimated expenditures and available resources necessary to provide the services for which the government was created. An operating budget will contain flexible budgets and fixed budgets; the fixed budgets will include annual/biennial appropriations for services and the annual/biennial portion of continuing appropriations for debt service Notes to Financial Statements and for service projects. Preparers should carefully evaluate and consider the impact of external events on their 2022 interim financial reporting and provide an update of relevant entity-specific disclosures since the last annual reporting date. Another thing that the notes may tell users is whether the company uses cash basis or accrual basis accounting methods. Cash basis records income when it is received and expenses when they are paid.

Understanding The Cash Flow Statement

Governments should establish and maintain those funds required by law and sound financial administration. Only the minimum number of funds consistent with legal and operating requirements should be established. Using numerous funds results in inflexibility, undue complexity, and inefficient financial administration. In general fiduciary funds are resources that are held by a government for the benefit of others.

For purposes of paragraph of this section only, do not include securities or other assets for which unrealized changes in market value are reported in current income or which have been obtained under reverse repurchase agreements. In cases where separate financial statements are presented for the registrant, certain investees, or subsidiaries, any intercompany profits or losses resulting from transactions with related parties and the effects thereof shall be disclosed. In conclusion, all the line items on the financial statements need a background explanation which must be reported for the public to understand and notes to the financial statements do the trick for you. On the income statement we only report general admin expenses and selling and distribution expense. The allocations of purchase price to the assets acquired and liabilities assumed or incurred in connection with the Acquired Clark-Schwebel Business are based on current estimates of fair values, and are subject to change until September 15, 1999. As part of the acquisition, Hexcel entered into a $50,000 lease for property, plant and equipment used in the acquired business from an affiliate of CS, pursuant to a long-term lease which includes purchase options. Hexcel invests excess cash in investments with original maturities of less than three months.

The management’s discussion contains many forward-looking statements that involve risks and uncertainties. Since the financial statements provide only a summary of what the company is required to report, it is important for financial analysts to read the disclosures and other supplementary information to know the real story. Any contingent liability shall be disclosed in the notes to financial statements since they can’t be reported on the financial statements.

Bars Alerts

The single‐step format puts revenue and expense accounts into separate groups. Then, total expenses are subtracted from total revenues to determine the net income or loss. Code Debt Service Funds – should be used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds should be used to report resources if legally mandated. Financial resources that are being accumulated for principal and interest maturing in future years also should be reported in debt service funds. The debt service transactions for a special assessment for which the government is not obligated in any matter should be reported in an agency fund. Also, if the government is authorized, or required to establish and maintain a special assessment bond reserve, guaranty, or sinking fund, it is required to use a debt service fund for this purpose.

Notes to Financial Statements

The lease expires in September 2006 and includes various purchase options. The aggregate fair value of the Convertible Subordinated Notes, due 2003, was approximately $96,100 and $196,000 as of December 31, 1998 and 1997, respectively. The aggregate fair value of the Convertible Subordinated Debentures, due 2011, was approximately $19,000 and $25,500 as of December 31, 1998 and 1997, respectively. On January 21, 1999, the company issued $240,000 of 9.75% Senior Subordinated Notes, due 2009. Net proceeds of approximately $231,000 from this offering were used to repay amounts owed under the Senior Credit Facility.

Sample Notes To Financial Statements

These budgets are also called legal budgets, adopted budgets, or formal budgets. The appropriated budgets should be adopted by ordinance or resolution. Your annual financial statement will include a lengthy explanation about your company and its activities for the year. But notes to other financial statements will include a brief paragraph about your company, and also list the company’s legal status.

  • They are normally found as a line item on the top of the balance sheet asset.
  • So, while the local governments are required to follow their legal requirements, they will have to make some adjustment to their fund structure for external financial reporting.
  • It functions as a supplement, providing clarity to those who require it without having the information placed in the body of the statement.
  • The notes to the financial statements are a required, integral part of a company’s external financial statements.
  • Personal financial statements may be required from persons applying for a personal loan or financial aid.
  • Any items within the financial statements that are valuated by estimation are part of the notes if a substantial difference exists between the amount of the estimate previously reported and the actual result.

Firms, however, balance the benefits of voluntary disclosure against the costs, which may include the cost of procuring the information to be disclosed, and decreased competitive advantage. Any significant changes in the authorized amounts of bonds, mortgages and similar debt since the date of the latest balance sheet being filed for a particular person or group shall be stated. Disclosure of important information that is not recognized in the financial statements.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payments to shareholders or issue capital securities. Our fourth interim reporting period and our fiscal year end on December 31 regardless of the day of the week on which December 31 falls. May also include information regarding future activities that are anticipated to have a notable impact on the business or its activities. Means dealing and other trading activities measured at fair value with gains and losses recognized in earnings.

The original budget should also include actual appropriation amounts automatically carried over from prior years by law. Disclosing this contingent liability is a requirement if the company will owe a substantial amount of additional tax penalties and interest if the unsolved examination ends up in the government’s favor. Financial accountants use the terms footnote, note, and explanatory note pretty much interchangeably as all three terms represent the same explanatory information.

For example, the current or previous year’s 10K is available in addition to quarterly reports – click on any of these links to view their respective notes sections. The Senior Credit Facility, and substantially all of the various European credit facilities and other notes payable outstanding as of December 31, 1998 and 1997, are variable-rate debt obligations. Accordingly, the estimated fair values of each of these debt obligations approximates their respective book values. The Senior Credit Facility is secured by a pledge of shares of certain of Hexcel’s subsidiaries. In addition, the company is subject to various financial covenants and restrictions under the Senior Credit Facility, and is generally prohibited from paying dividends or redeeming capital stock. Approximately $544,000 of the Senior Credit Facility, after the issuance of the Senior Subordinated Notes, expires by September 2004, with the balance expiring in 2005.

A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period. Financial accounting is primarily concerned with matching revenues and costs to the period in which they were incurred, not tracking for net income for tax purposes. As a result, there are often differences between the cash flow statement and the income statement.

If we look at financial statements, they are just numbers and numbers. A true understanding of the state of affairs is not possible until you understand how those numbers arrive. If these notes were mixed with the financial statements, wouldn’t it create clutter in the annual report? To avoid such clutter, notes to financial statements are separated from financial statements. For example, a user who is just interested in how much dividend is declared can only go to the required section and find out. If the user is an analyst, he will not only read the financial statements but will do an in-depth analysis of the footnotes also. Except for the cash flow statement, annual financial statements are prepared using the accrual basis of accounting.

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