Footnotes To The Financial Statements

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DEFINITION of 'Footnotes To The Financial Statements'

Additional information provided in a company's financial statements. Footnotes to the financial statements report the details and additional information that are left out of the main reporting documents, such as the balance sheet and income statement. This is done mainly for the sake of clarity because these notes can be quite long, and if they were included, they would cloud the data reported in the financial statements.

INVESTOPEDIA EXPLAINS 'Footnotes To The Financial Statements'

It is very important for investors to read the footnotes to the financial statements included in a company's periodic reports. These notes contain important information on such things as the accounting methodologies used for recording and reporting transactions, pension plan details and stock option compensation information - all of which can have material effects on the bottom-line return that a shareholder can expect from an investment in a company.

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