Final answer:
The notes to financial statements provide additional information about the financial statements presented in an organization's annual report, including accounting policies, assumptions, estimates, contingencies, and risks.
Step-by-step explanation:
The notes to financial statements provide additional information about the financial statements presented in an organization's annual report. They include details about specific accounting policies, assumptions, and estimates used in preparing the financial statements. They also disclose any contingencies or potential risks that may affect the organization's financial position.
For example, the notes might explain the methods used to calculate depreciation expenses or the valuation of inventories. They might also disclose any pending lawsuits or unresolved tax disputes that could impact the organization's financial results.
The purpose of the notes to financial statements is to provide transparency and clarity for users of the financial statements, such as investors, creditors, and analysts, so they can make informed decisions based on a complete understanding of the organization's financial position and performance.