A disclosure technique that involves provision of information with a detailed, explanatory nature. This technique is used in cases where information cannot be conveyed by means of short and concise explanation (parenthetical explanation). Note disclosure is necessary to explain the amounts reported on the financial statements, in order to better cater to the needs of the users of these statements. For example, an internal reference to note, as part of financial statements, may explain an asset item (such as inventories) in the following manner:

Inventories (see note 1) CU 2,000,000

In the notes section:

Note 1: Inventories are carried at the lower of cost or net realizable value (NRV). Cost is measured using the FIFO method (first in, first out), while net realizable value is determined as the expected selling price of inventory items in the ordinary course of business, less the costs of completion, selling, transportation, etc.

Note disclosure forms an integral part of the financial statements of an entity.

This technique is also known as notes to financial statements, explanatory notes, and footnotes.