It’s important for companies to disclose vital information in regards to the activities of their companies. These activities may include those which are financial or those of environmental sustainability.
Disclosures in Financial Reports can be found in Footnotes. A business’s financial report is much more than just the financial statements. A financial report needs additional information, called disclosures. Footnotes are one form of disclosure included in a financial report. Virtually all financial statements need footnotes to provide additional information for several of the account balances.
One or more footnotes are included to identify the major accounting policies and methods that the business uses. The business must reveal which accounting methods it uses for booking its revenue and expenses. In particular, the business must identify its cost of goods sold expense and inventory method and its depreciation methods.
The footnote helps clarify the accounting methods that have a material impact on the financial statements. And of course certain standards apply when disclosing the business’s accounting methods.
- The Financial Accounting Standards Board (FASB) has laid down many disclosure standards for businesses reporting for generally accepted accounting principles.
- Publicly traded companies are subject to some very strict reporting regulations.
- International businesses abide by disclosure standards adopted by the International Accounting Standards Board (IASB).
Financial reporting is also usually integrated with sustainability reporting. With sustainability reporting it combines economic performance with social responsibility and environmental care. Sustainability reporting aims to help businesses set goals. It also measures performance and manages change towards sustainability.
Many governments and stock exchanges require businesses to provide some level of sustainability reporting. This has become important because of growing social and environmental injustices, high-profile corporate scandals and the global financial crisis.
South Africa has 12 initiatives for sustainability reporting. These are made up of mandatory requirements, voluntary guidance and initiatives put in place by the government, the local stock exchange and market regulators. Disclosure standards for business reporting are important because poor disclosure can lead to a decline in investments for a country.