In preparing footnote disclosures, reporting entities should consider their intended purpose. A primary objective of financial reporting is to provide information to investors, lenders, creditors, and others for use in making decisions about whether to commit resources to the reporting entity. Disclosures should assist users in assessing both a reporting entity's historical performance and cash flow prospects. Disclosures should also amplify information reported on the face of the financial statements, and focus users' attention on matters that are most relevant to understanding those financial statement areas.

Reporting entities can enhance the format and organization of the footnotes to help focus users on the most decision-useful information. Footnote disclosures should include (1) clarity about relevant policies and significant transactions, and (2) organization that eases navigation. Reporting entities should consider employing best practices such as:

In addition, within established rules and legal requirements, we encourage reporting entities to exercise well-reasoned judgment to determine which disclosures are most relevant to their financial statement users. Extensive footnote disclosure requirements impose costs on both reporting entities and investors. The costs to reporting entities include preparing and analyzing information, maintaining internal controls, and audit costs. Investors indirectly bear these costs as well as the cost of the time needed to assess data presented in the footnotes to determine whether it is relevant for their decision-making.