Notes to accounts

The section behind the three statements that explains what the numbers are made of. It is several times longer than the statements themselves and it is where almost all the analysis actually happens.

The order is predictable. Accounting policies come first, then a note per balance-sheet and income-statement line, then the disclosures that stand alone: related parties, contingent liabilities, segment results, employee benefits, financial instruments and fair values.

A reader in a hurry can get most of the value from five of them. Revenue recognition policy, the breakdown of other income, receivables and inventory ageing, related party transactions, and contingent liabilities.

The statements tell you what a company reported. The notes tell you whether to believe it.

Start at the back. Work forwards.