An indispensable attribute of financial statements is an explanatory note, which is compiled according to various documents and has the main purpose of disclosing in more detail and detail information explaining the accounting activities of an enterprise or organization. Its content and mandatory presentation are provided for in paragraph 5 of PBU 4/99. As a rule, the content of the note includes some additional data: tables, graphs, charts, which allow interested persons to most accurately and objectively evaluate the economic activity of an enterprise or organization.
According to established practice, an explanatory note is not provided by small enterprises that are not required to carry out a mandatory audit of financial statements.
An explanatory note to the balance sheet submitted by a specific date should contain the following information, divided into sections.
1. General information about the enterprise should contain information about:
- the organizational form of the legal entity and its name;
- actual and legal address;
- the number of employees at the reporting date and their average annual number;
- name, structure and composition of governing and executive bodies;
- information about the founders of the company or organization;
- the amount of the authorized capital;
- availability of licenses, time of their issuance;
- the amount of taxes paid;
- information about the auditor.
2. General characteristics of accounting policies. In this section, the explanatory note reflects the accounting rules applied at this particular enterprise, as well as those changes that were made to it indicating the reasons for these changes. In addition, all those results that have occurred as a result of changes to the accounting policy methodology are indicated.
3. Data on individual assets shall be reflected in fixed assets of the enterprise, inventories, loans, financial investments and assets made in foreign currency.
In particular, such data is information on the initial value of fixed assets and depreciation deductions, on useful lives, on real estate owned by an enterprise, on methods for assessing fixed assets and assets of an enterprise, on the movement of material resources, on company debts, on the amount of loans and their maturity dates, the value of securities and assets, and others.
4. Profit analysis explanatory note reflects the activities of the enterprise or organization. For this assessment, we specifically calculate the coefficients that characterize the parameters of liquidity, profitability, financial activity, and solvency. In this case, the explanatory note to the annual report must necessarily contain data on the availability of financial resources at the cash desk and on the accounts of the enterprise, the amount of losses incurred and their causes, untimely repaid loans, information on fines and other sanctions paid, analysis of the general financial situation of the organization or enterprise.
5. Information on the balance sheet of the enterprise reflects in the note the volume of sales, the composition of production costs and their reserves, emergency cases of economic activity.
6. Explanations for specific accounting items.
7. Assessment of the general business activity of the enterprise, which indicates the volume of markets, the reputation of the organization, the level of fulfillment of the forecast parameters of the development of the enterprise and the efficient use of resources.
8. Data on changes in the value of opening balances and their causes.
9. Information about subsidiaries and affiliates and organizations with a detailed description of the characteristics of their economic activities.
10. Contingencies - legal proceedings in which the enterprise participated, warranty obligations, obligations.
11. Information on the state of conducting joint activities: goals, amount of contribution to it, types and number of contracts, value of assets, amount of profit, information on joint operations and assets.
12. Segment information is provided when an enterprise or organization has subsidiaries or affiliates or firms.
13. Information on events that occurred after the reporting date and analysis of the causes and consequences.
14. Data on state assistance, if provided. Here, its purpose, nature and size, terms of provision and results of use are indicated.
15. Environmental indicators reflecting the magnitude of the impact of production activities on the environment.
16. The information provided by the joint-stock company should include information on the number of all types of shares and data on their nominal value.
17. Information to be reflected in accordance with RAS 18/02.
18. Information about discontinued operations.
19. Other data.
The correct and complete presentation of the data in the note serves not only as an important element of the accounting policy, but also as an effective tool for an in-depth analysis of the enterprise's activity with the aim of developing a strategy for its future development.