What is Included in Financial Disclosures
Financial disclosures are public documents that provide information about a company’s financial health.
Assets and Liabilities
Assets are anything that a company owns or is owed to it. Liabilities are anything that a company owes to others.
Both assets and liabilities are included in disclosure because they provide a snapshot of a company’s financial health.
The following is a table of the most common assets and liabilities:
- Assets
- Cash and accounts receivable
- Inventory
- Property and equipment
- Investments
- Intangible assets (such as patents and trademarks)
- Liabilities
- Accounts payable
- Notes payable
- Bonds payable
- Mortgages
- Accrued expenses
Income
The Financial Disclosure also includes information about your income. This includes all income you earned over the past year, regardless of its source. Some of the most common types of income include:
- Wages and salaries
- Self-employment income
- Investment income
- Retirement income
- Social Security benefits
- Disability benefits
- Unemployment benefits
- Alimony and child support payments
- Lottery winnings
- Gambling winnings
- Inheritances
- Gifts
| Income Source | Amount |
|---|---|
| Wages and salaries | $30,000 |
| Self-employment income | $10,000 |
| Investment income | $5,000 |
| Retirement income | $2,000 |
| Social Security benefits | $1,000 |
Ownership Interests
Ownership interests refer to assets or properties that you fully or partially own. These interests must be disclosed on financial disclosure forms to provide a comprehensive view of your financial situation.
- Real estate: Includes homes, rental properties, land, and any other real estate holdings.
- Stocks and bonds: Stocks represent ownership in companies, while bonds are loans that pay interest.
- Mutual funds and ETFs: Baskets of stocks and bonds that offer diversified investments.
- Businesses: Any business or organization in which you have an ownership stake.
- Intellectual property: Patents, trademarks, copyrights, and other intangible assets with monetary value.
When disclosing ownership interests, it’s crucial to include the following details:
| Attribute | Details |
|---|---|
| Asset Description | Name, address (for real estate), or description of the asset |
| Ownership Type | Full or partial ownership, shares held, etc. |
| Acquisition Date | When you acquired the asset |
| Current Value | Estimated or appraised value as of the disclosure date |
Transactions with Related Parties
Transactions with related parties are relationships between two or more entities where one party has the ability to control the other. Related parties include:
- Majority-owned subsidiaries
- Parent companies
- Affiliates
- Key management personnel
- Close family members
These transactions must be disclosed in a company’s financial statements because they may not be conducted at arm’s length, meaning that the price or terms of the transaction may be influenced by the relationship between the parties. As a result, these transactions may not be in the best interests of the company or its shareholders.
The following information about related-party transactions must be disclosed:
- The nature of the relationship
- The amount of the transaction
- The terms of the transaction
- Any potential conflicts of interest
This information helps investors understand the potential risks associated with these transactions and make informed decisions about whether or not to invest in the company.
| Relationship | Example |
|---|---|
| Parent company | Company A owns 51% of the voting stock of Company B. |
| Affiliate | Company A and Company B are both owned by the same parent company. |
| Key management personnel | The CEO of Company A is also a director of Company B. |
| Close family member | The CFO of Company A is the brother of the CEO of Company B. |
Hey folks, thanks so much for sticking with me through this financial disclosure deep dive. I know it can be a snoozefest sometimes, but it’s super important stuff. If you’ve got any questions, don’t hesitate to holler. And be sure to check back later for more financial wisdom. Stay tuned for more money magic!