Short Paper on Footnotes
Overview
Footnotes can provide additional information or details for financial statements. This short paper will allow you to identify the main function of footnotes and evaluate footnotes from various companies.
This activity will help you complete Project One.
Directions
For this assignment, you will be taking a close look at the key elements of footnotes and their purpose. Several links are provided in the Supporting Materials section, including three different organizations’ financial statements plus resources on how to research and read the financial statements found on the U.S. Securities and Exchange Commission (SEC) website. These are the financial statements of the organizations you will need for the assignment.
Finally, after you have had the opportunity to evaluate three different companies, give thought to why footnotes require more than numbers.
Specifically, you must address the following rubric criteria:
Identify the key elements of footnotes. Consider the following questions to guide your response:
What information is typically included in footnotes?
How do companies know what information they need to include in their financial statement footnotes?
Identify the purpose of footnotes. Consider the following questions to guide your response:
Why are footnotes important and how are they used with financial statements?
What kind of statement components are footnotes typically prepared for?
Why do financial statements need supplemental information to explain numbers?
Evaluate different company situations and their applications of footnotes. Include three different companies. Consider the following questions to guide your response:
How do the various companies utilize footnotes?
How are companies’ situations similar or different?
What to Submit
Submit your short paper as a 1- to 2-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style.
Supporting Materials
The following resources support your work on this assignment:
Website: Using EDGAR to Research Investments
https://www(dot)investor(dot)gov/introduction-investing/getting-started/researching-investments/using-edgar-research-investments
This website explains how to research a public company’s financial information and operations by reviewing the filings the company makes with the SEC. It is not necessary to click on additional links on the website for this assignment.
Website: How to Read a 10-K/10-Q
https://www(dot)investor(dot)gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/how-read
This website explains what a 10-K and 10-Q are and how they can be used to follow or invest in a U.S. public company. It is not necessary to click on additional links on the website for this assignment.
Website: Walmart Inc. Form 10-K
https://www(dot)sec(dot)gov/ix?doc=/Archives/edgar/data/104169/000010416922000012/wmt-20220131.htm#i1ba69ebb72ec48f9b754a5e96c4cdf3f_139
This is one of Walmart’s annual reports, Form 10-K. Pay close attention to the footnotes of this document. It is not necessary to click on additional links on the website for this assignment.
Website: Alphabet Inc. Form 10-Q
https://www(dot)sec(dot)gov/ix?doc=/Archives/edgar/data/0001652044/000165204422000029/goog-20220331.htm#if498f6f02e5a474790944835d386b56b_16
This is one of Alphabet Inc.’s quarterly reports, Form 10-Q. Alphabet, Inc., is the parent company of Google. Pay close attention to the footnotes of this document. It is not necessary to click on additional links for this assignment.
Website: Tesla, Inc. Form 10-K
https://www(dot)sec(dot)gov/ix?doc=/Archives/edgar/data/1318605/000095017022000796/tsla-20211231.htm#consolidated_balance_sheets
This is one of Tesla, Inc.’s annual reports, Form 10-K. Pay close attention to the footnotes in this document. It is not necessary to click on additional links for this assignment.
Short Paper on Footnotes
Student’s Name
Institutional Affiliation
Short Paper on Footnotes
Footnotes are additional information or details provided in financial statements to give more context and understanding to the numbers presented (United States Securities and Exchange Commission, 2021a). The critical elements of footnotes include information such as accounting policies, explanations of significant transactions or events, and any contingencies or uncertainties that may affect the financial statements. Companies know what information to include in their financial statement footnotes by following generally accepted accounting principles (GAAP) and other regulatory guidelines (United States Securities and Exchange Commission, 2021a).
The purpose of footnotes is to provide additional information that helps users of financial statements understand the numbers presented (United States Securities and Exchange Commission, 2021a). They are used in conjunction with financial statements to provide more transparency and to help users make informed decisions. Footnotes are typically prepared for financial statement components such as the balance sheet, income statement, and cash flow statement. Financial statements need supplemental information to explain numbers because the numbers alone may not provide enough context for users to understand the financial position or performance of the company.
When evaluating different company situations and their applications of footnotes, it is essential to note that the use of footnotes may vary between companies. For example, Walmart Inc.’s Form 10-K includes footnotes on accounting policies, contingencies, and other matters (United States Securities and Exchange Commission, 2022a). Alphabet Inc.’s Form 10-Q includes footnotes on accounting policies, contingencies, and other issues but also has a detailed ...