Explanatory notes: a key element in interpreting annual financial statements

In an effort to clarify and strengthen best accounting practices, Dana Moisoiu, Senior Consultant at Geseidl Consulting Group, draws attention to an aspect often overlooked in financial-accounting activity: explanatory notes.

Far from being a mere annex, explanatory notes constitute an essential pillar of the transparency and accuracy of financial reporting. With their content, they provide the necessary context for a real understanding of the balance sheet, profit and loss statement and, where applicable, other components of the annual financial statements.

“Treating explanatory notes seriously reflects not only compliance with current regulations but also respect for users of this information – whether they are partners, auditors, or fiscal authorities,” emphasizes the Geseidl expert.

What do accounting regulations say?

According to chapter 6 of MF Order no. 1802/2014, explanatory notes must:

• Present the applicable accounting framework and the accounting policies used;
• Complete the information in the balance sheet and profit and loss statement, providing relevant details not included in them;
• Confirm compliance of the reporting with Accounting Law no. 82/1991 and specific regulations;
• Explicitly state: the name of the entity, the reporting period, the currency used, and the unit of expressing values.

The structure of the notes must follow the order of the elements in financial statements and include explanations for each significant element. The absence of such details may be interpreted as non-compliance with accounting regulations.

Our recommendation

Pay special attention to the preparation of these notes. They are not optional or secondary, but key instruments of transparency and accounting accuracy. The information provided in this format contributes not only to legal compliance but also to strengthening the trust of partners, auditors, and fiscal authorities in financial reporting.

 We remind you of the deadlines for submitting financial statements for the year 2024:

• NGOs: by April 30, 2025;
• Companies: by June 2, 2025.

For assistance in correctly and completely drafting the explanatory notes, the Geseidl Consulting Group team is at your disposal.