Video: Types of Financial Information

In this lesson, Nick Palazzolo, CPA, unpacks the essential components of financial information, providing a clear breakdown that goes from core financial statements to supplementary details and beyond. He makes it easier to understand the various layers of financial reporting, including the significance of the basic financial statements and their components, such as notes on policies and shares outstanding. Nick also delves into supplementary information and its relevance in financial reporting, stressing the importance of ensuring all necessary details are captured for accurate decision-making. Furthermore, he discusses MD&A (Management Discussion and Analysis) and letters to shareholders, emphasizing that the completeness of financial information extends to anything relevant for informed decision-making, even if not explicitly required by standards.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Okay, now we have the types of financial information. Take a look at this. I'm not going to say you need to memorize it, but it's pretty helpful. It's actually really helpful. So the core financial statements, right? These are the core financial statements, right? Check box. Basic financial statements. And when we talk about them, we're talking about this. Now, here's your little appendix. Your notes to the financial statements, your policies, contingencies, inventory methods, and shares outstanding. Obviously, there's more than that. These are the basic financial statements. When we're talking about that, this is what we're talking about. These need to be included and discussed.

Now, what about our next category is supplementary information. So if we're changing prices significantly of what we're selling, if we've got maybe a lot less fuel on the balance sheet, basically things that probably wouldn't be included in the notes, but are also important. These are an area directly affected by existing FASB standards. This could be necessary, right? Necessary supplementary information. However, it's just not in the notes. But another possible area to talk about. There are other means of financial reporting. These need to be included as well.

So, in all of our financial reporting, this is what's done MDNA. This is where management talks about management discussion and analysis. Management talks about everything that they need to talk about, right? They give the important information, give the executive summary, and then lastly, letters to stockholders. What do you want to tell the stockholders directly? If you want me to summarize it like a one-page letter, what is important for them to know? And lastly, other information. So there's no end to the information that should be provided as long as that information is important, relevant, for decision making, right? So,

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