Financial Accounting For Dummies

Chapter 15

Got Your Dictionary Ready? Reading Explanatory Notes and Disclosures

In This Chapter

Touching on corporate governance

Studying the characteristics of a corporation

Finding out more about a company by reading its notes and disclosures

Figuring out who is responsible for full disclosure

This chapter begins with a quick overview of corporate governance and ends by shedding light on the explanatory notes and other information found in most corporate annual reports. I provide the complete picture on corporate annual reports in Chapter 16. Basically, they educate the shareholders about corporate operations for the past year.

Also in this chapter, you learn how a business becomes a corporation, and you review the four characteristics of a corporation: continuity, easy transferability of shares, centralized management, and (the biggie) limited liability.

The complete list of notes and disclosures that may appear on a corporate annual report is quite long, so I can’t cover every one here. Instead, I focus on the most common explanatory notes and disclosures popping up on corporate ...