Deck 13: Notes to the Financial Statements: The Inside Story

Question 1

Why must organizations disclose their accounting policies in the notes to the financial statements?

Answer 1

GAAP often allows for different alternative choices, and these decisions might influence how the numbers are presented on the financial statements.

Question 2

Charity care is reported in the notes for not-for-profit health care organizations, but revenues and expenses are not recorded in the operating statement. Explain your answer.

Answer 2

True
Because there is no expectation of receiving the revenue, charity care cannot be recorded as revenue. Expenses are intermingled with the other line items.