A company should make financial statement periodically. The report of company contain balance sheet, income statement, cash flow statement and equity statement. Some company also put footnotes especially public company. Either GAAP (FASB standards) or Security Exchange Committee (SEC) asks these data as the integral audited financial statement to every public company.

The aim of footnotes is for explaining the component of financial statement. Sometimes, the explanation is longer so it is difficult to put it in financial statement. For example, the notes of fixed asset which has depreciation calculation needs at leats two pages paper.

The financial notes is important for investment analysis. The investor should analyse the detil of financial statement. Each company has different calculation and accounting policy. Example, Most company use FIFO methods as inventory calculation; on the other hand, a few company still use LIFO methods. Certainly, the inventory calculation of different method could result different number too.

If we explain the detail of financial statement in balance sheet form or income statement form, the balance sheet and income statement must be complicated. 

What is the contain of footnotes:

1. The company profile of the company include company history, company activity, company board, etc.

2. Explain the accounting policy of the company. Some company has different accounting policy especially multi national company.

3. Explain the detail account item like fixed asset, inventories, income taxes, pension and other post employment benefits plan, income, debt (interest rates, maturity schedules, and contractual terms), lawsuits and other loss contingencies, marketable securities and other investments, hedging and other risk management activities, business segment, significant customers, sales to related parties, and export sales.