Limitation of Accounting Information Notes

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Accounting is a method companies use to record financial information. Statements or reports are issued for review, and notes and other comments may exist with the information. These notes, and the accounting information, have limitations.

Facts

  • Financial accounting information reports on the past transactions of a company, so limitations already exist. What happened last month does not necessarily guarantee success for this month. Accountants may need to make judgment calls, which can indicate decisions made with limited information.

Features

  • The additional notes and information included on financial statements are commonly disclosures or comments. These notes may indicate that accountants estimated information. These estimations have limitations because accountants do not have sufficient information for past or future financial transactions.

Example

  • A common example of accounting notes relates to the fair market value of land or buildings. Fair market value accounting rules require accountants to adjust historical book value to current figures. Accountants will make a note that the fair market value can have limitations if the asset is difficult to value at fair market value.

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