Your clients’ financial statements tell a story about their business. They relay to interested parties the organization’s financial position–past, present and future. Although financial statements have historically revolved around standard reports such the Balance Sheet and Income Statement, high-quality note disclosures will reveal relevant and material additional information.
Customize Per Your Client’s Industry and Situation
Many note disclosure templates or checklists are boilerplate. They can be recycled and used for different companies regardless of your client’s size, industry, or finances. The easiest way to deliver stronger note disclosure is to tailor those notes to your clients and their related industries. In addition to accounting policies and conventions, you want to disclose material risks and uncertainties, and you want to consider the requirements of all interested parties, including management, the practitioner, and interested third-parties. After all, users of your clients’ financial statements will want to know about material events that might impact on your clients’ financial position.
Pare Down Words
There certainly are note disclosure rules that you have to follow. But whenever possible, get straight to the point about information that truly matters. Consider using disclosure checklists that are tailored to your clients’ industry or that are sector-specific. Using these revamped checklists will allow you to, not only become more effective, but to also save time by not focusing on disclosures that are irrelevant or immaterial. Remember that by elaborating on issues that don’t matter, you take space, time, and attention away from events that do impact your client’s performance. Your goal should not be to bury what’s important but to make it the central focus of the note disclosures.
Be Fully Transparent With Voluntary Disclosures
Your clients don’t have to voluntarily disclose extra information, but they can certainly choose to add information that isn’t required. This is usually an analysis of financial performance from their point of view, how your client feels about the general health of their company, and what the future has in store. When people use your client’s financial statements, they’ll be able to use this narrative to get an even deeper sense of what your client’s company is like.
Spend More Time on Areas of Judgement
Many accounting rules are straightforward. For instance, there are certain ways your client can account for inventory. There are also some cases where your client has to make estimates and use professional judgement. For these situations, you can have higher quality disclosure by spending more time on things that aren’t clearly defined in the statements. How did your client come up with their allowance for a bad debts estimate? What about your client’s estimated warranty claim balance? The clients’ notes should make it easy for users to understand how these were calculated.
There are a myriad of rules for disclosing information regarding your client’s financial statements and even more ways you can customize their notes to provide higher quality information to financial statement readers. Instead of sticking to what every other set of financial statements disclose, consider making your client’s notes unique and more valuable to users.