The purpose of financial statements (F/S) is to give users information for making decisions. However, not all relevant information can be presented directly in the statements. Therefore GAAPThe abbreviation for Generally Accepted Accounting Principles applicable to financial reporting in the U.S. requires that F/S be accompanied by informative disclosures (ie, financial statement notesRequired additional financial and nonfinancial information that is part of the issued financial statements. Examples include accounting policies, account valuations, and subsequent events.) that provide more detail about the amounts presented and help users interpret and understand the F/S. These disclosures are an integral part of the F/S and provide additional information; they do not duplicate material already disclosed in the statements (Choice D).

The disclosures include a summary of significant accounting policiesA required note to the financial statements that details an entity’s accounting choices made, when more than one accounting method is permitted. This includes choices made relating to revenue recognition (including long-term contract recognition), inventory costing, depreciation, investment classification, and the basis of consolidation., descriptions of long-term obligations (eg, debt, contingencies, pensions, leases), and related partyA party (eg, owner, manager, family member) affiliated with the entity. The associated risk is that transactions between the party and the entity may lack commercial substance. transactions.

(Choice A) Although principles and methods peculiar to an industry may be disclosed in the F/S notes, there are many other disclosures.

(Choice C) GAAP does not fix the location and format of accounting policy disclosures but generally leaves such decisions to the accountant's professional judgment.

Things to remember:
Financial statements (F/S) are accompanied by disclosures that provide additional information relevant to users but not presented in the statements themselves. These disclosures are an integral part of the financial statements.