Notes to the financial statements | Glossary

The notes to the financial statements are the part of the statements, separate from the primary statements (the balance sheet, the income statement and so on), that adds accounting policies, breakdowns of line items and risk information. For derivatives, contract amounts, fair values and the status of hedging are disclosed there.

Standards and rules fix which items the notes contain. For example, the Japanese Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements requires the fair value of financial instruments and the contract amounts of derivative transactions to be disclosed in the notes.

Consider a hypothetical example in which a balance sheet shows derivative assets of 2 billion yen. The primary statement does not show what makes up the 2 billion yen. If the notes show a gross amount of 3 billion yen, of which 1 billion yen was offset to reach 2 billion yen, the reader can trace the effect of offsetting.

The footnotes at the end of an article or a glossary entry give the location of each source and are different from the notes to the financial statements.

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