Page 240 - Accounting Best Practices

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12–4 Write Financial Statement Footnotes in Advance
the transfer of information to a different format, such as an electronic spread-
sheet, for further analysis and regrouping into a customized report. In this case,
the amount of time required to assemble and independently prepare the reports
may exceed the time needed to create the primary financial statements. Thus, the
more reports included in the financial statements, the more time it takes to issue
the statements.
The best way to avoid this problem is to make a list of all the reports
included in the financial statements, ignore those that are automatically created
by the accounting software, and focus on eliminating or delaying those that are
created separately. It may be possible to strip these reports out of the basic finan-
cial reporting package, allowing the accounting staff to issue the basic underlying
statements much more quickly. To achieve this goal, it may be necessary to
explain to management that the reports will no longer be provided at all (which is
normally not received well). Other variations are to issue the reports separately
and at a later date, or to issue them less frequently, such as once a quarter or year.
Usually, there is some combination of methods that will be agreeable to manage-
ment, thereby allowing a controller to restrict the level of reporting in the finan-
cial statements to only the most basic information.
Management may take a better view of this reduction in the information pro-
vided if the controller or CFO makes it known that, while information will be
delayed, other information will be provided more frequently in order to meet the
operating needs of the company. For example, the accounting department could
promise daily access to information about changes in revenues, discounts given
to customers, and expenses, and weekly access to changes in headcount informa-
tion. By providing this information so rapidly, it reduces the negative impact of
restricting some information from the financial statements, while also providing a
service by issuing key information even sooner than it had previously been
issued.

Cost: Installation time:

12–4 WRITE FINANCIAL STATEMENT FOOTNOTES IN ADVANCE
There are many footnotes that accompany a well-documented set of financial state-
ments. These typically include an executive summary, notes on the accounting
methodologies, the amount of long-term debt (as well as the years in which it
comes due), a commentary on insurance coverage, any customers with a high pre-
ponderance of a company’s sales, and a historical comparison of the current results
to prior years. Depending on the number of footnotes added to the financial state-
ment package, this can be a considerable amount of work to update every period.
The best way to avoid much of the work required to create footnotes is to
separate them into two categories: boilerplate information that is rarely changed,
and information that is closely linked to current financial results, requiring a great