Users of financial statements use them to make decisions of a different nature, as well as to evaluate the management and situation of the entity, that is why it is not only enough to have the final figures presented in the financial statements but also explanations, details, professional judgment, accounting policies, estimates and any other useful information for the reader.
I have come across many managers who as readers are interested and find it extremely useful to know about the estimates and other judgments used when applying accounting policies, these disclosures for example, allow users of financial statements to better understand how they are applied. accounting policies, as well as making comparisons between entities with respect to the bases on which management makes said judgments and being more involved and sure of the information presented.
As managers we know that the ideal is to have quantitative and also qualitative information to be able to form an opinion and make the most accurate decisions possible, this is understood very well by the IASB and gives the rank (let's say it like this) to the notes of the statements financial statements it deserves by placing it on par with the financial statements presented.
In the IFRS for SMEs, this issue is dealt with in section 8, it states that the notes contain additional information to that presented in the statement of financial position, statement of income / and accumulated earnings or comprehensive (if presented), the statement of changes in equity (if presented) and statement of cash flows. They provide narrative descriptions or breakdowns of items presented in those statements as well as information on items that do not meet the conditions to be recognized.In them, something to limit and make clear is the fact that in addition to the requirements of section 8, almost all other sections of the Standard require disclosure information that is normally presented in the notes.
The notes to the financial statements must have a structure, this is:
- Basis of preparation and accounting policies Information required by the standard in each section Additional information that is relevant for understanding the financial statements.
The presenter of the financial information will ensure that as far as possible the notes are in a systematic way, counting on their related reference number, in terms of order, it should firstly be the statement of the fact that they are fully complying with this international standard, the summary of the significant policies, supporting information of the items presented and finally any other information that is considered relevant and of great help to users.
In the notes, we usually obtain, before the declaration of compliance with the standard, general information about the entity such as its address, registered office, legal form, country of incorporation, description of the nature of its operations and main activities, the date of authorization of the financial statements for publication and who has granted such authorization will all help the reader to understand the entity even more.
The financial information should be as understandable as possible, and in this fact the notes are a fundamental piece, they are to facilitate the effective communication of information in the financial statements, the managers greatly appreciate the details and the additional relevant information that helps a better understanding, remember that the information presented is for a wide range of users and as such we must endeavor to present it as understandable and useful as possible.
Author: Lcdo. Michael Aular - Micdan Consulting
