Footnotes to Financial Statements
Disclosures attached to financial statements that explain accounting policies, estimates, commitments, and other details not visible in the main figures.
What is Financial Footnotes?
Footnotes (also called notes to financial statements) are disclosures that accompany the balance sheet, income statement, and cash flow statement in a company's annual or quarterly filings. They are required by GAAP and IFRS and provide critical context that cannot be conveyed in the numerical statements alone, including: accounting policies and methods chosen, details of debt and lease obligations, contingent liabilities and litigation risks, pension obligations, segment information, stock-based compensation plans, and related-party transactions. Experienced analysts often read the footnotes before the main financial statements, as footnotes are where managements disclose material uncertainties and risks that might otherwise go unnoticed. The phrase 'the devil is in the details' is particularly apt for financial footnotes.
Example
Apple's 10-K footnotes disclose tens of billions in operating lease commitments, details of its $750+ billion share repurchase program authorization, ongoing SEC and tax authority investigations, and the revenue recognition policies applied to bundled hardware-software products — information that does not appear in the main financial statement tables.