What is Notes to Financial Statements?
Notes to the financial statements are narrative and detailed quantitative disclosures that explain, expand, and supplement the figures shown in the primary statements (balance sheet, income statement, cash flow, and changes in equity). IFRS requires extensive disclosures covering accounting policies, judgments and estimates, segment information, related-party transactions, contingencies, and financial risk.
How It Works
- Statement of compliance with IFRS and the basis of preparation.
- Summary of significant accounting policies.
- Critical accounting judgments and key sources of estimation uncertainty.
- Detailed notes for each material balance sheet and income statement line.
- Other disclosures: contingencies, commitments, related parties, subsequent events.
Saudi Context
Tadawul-listed Saudi companies typically publish 60-120 pages of notes alongside the four primary statements. SOCPA-aligned IFRS, CMA Corporate Governance Regulations, and zakat / tax disclosure requirements together drive the depth of disclosure. Audit committees review the notes for completeness and clarity before board approval.
Example
Note 5 of a manufacturer’s financial statements details property, plant, and equipment: opening cost, additions, disposals, transfers, depreciation charge for the year, impairment, and the closing carrying amount by asset class. This reconciles the single PP&E line on the balance sheet to the underlying movements.