In this section, you will find any information regarding, for example, litigation that may lead to a loss of income in the future. So when you look at the revenue for Ford, it is booking that sale when the car leaves Ford’s plant and moves the dealership, not when you take it home. Regarding revenue recognition, the company adopted the latest FASB accounting rule, which eliminated all industry-specific guidance. It involves items such as revenue recognition, for example. *Employee retirement and other post-retirement benefit plans: Your main concerns here should be whether these future obligations of the business are seriously underfunded. You have to stay alert for other critical matters that a business may disclose in its footnotes, so scan each and every footnote for potentially important information. A company’s choice of accounting methods can shape its financial results. I will leave you with this thought when recently asked how to get smarter, Buffett held up a stack of papers and said, “read 500 pages like this everyday. As investors, we must understand what is contained in this section, as well as what items to look for when reading. Cumbersome Footnote Disclosure Requirements May Provide Vital Financial Insights. Sustainability reports aren’t mandatory in the United States, but public companies increasingly are required by the Securities and Exchange Commission to include sustainability disclosures about such issues as climate change and the use of conflict minerals in their financial reports. In this note, we see all the information breaking down the net income per share, including the revenues, costs, and shares outstanding. These notes are important because it contains information related to numerous subjects such as: All of these subjects may have material impacts on the bottom line of the company and are, therefore, important to analyze. Experienced bankers know to look beyond the numbers and read the footnotes to find out qualitative details and narrative disclosures, as well as what’s not being said. In every financial statement released, you will find the footnotes in the same position, below the financial statements. Self taught investor since 2012. Apps? The reason for the inclusion of footnotes in the annual or quarterly is the attempt at clarity and brevity of the financial statements. Suite 1600 Let’s take a walk through the financial statement footnotes of a company, say Cisco, to get a flavor of how these notes work. In some cases, the company will list out the results by quarter so you can see the quarterly progression of the company. On the flip side, a lack of information about sustainable business practices could be a warning sign that a borrower isn’t paying attention to these critical — and potentially costly — issues. In this section, we see all the information related to any acquisitions that Cisco has done for the period, whether annually or quarterly.