Notes to the Accounts: What They Are, What's Inside, and a Real 10-K Walk-Through

Michael Whitman · Trading since 2017, full-time since 2020 · YouTube creator, 137K subscribers · Published 2026-09-06 · Updated 2026-11-02 · Reviewed 2026-11-01

The notes to the accounts are the numbered pages that follow the financial statements and explain how each figure on them was produced. They state the accounting rules the company chose, break totals into their parts and describe obligations that are not on the balance sheet at all. Auditors cover them in the same opinion as the statements.

The easiest way to see what they do is to open a real set. Below, every example comes from Apple’s 10-K for the year ended 27 September 2025, filed with the SEC on 31 October 2025.

How it works

The statements are summaries; the notes are the detail behind each line. A statement line such as “term debt” or “provision for income taxes” is one number. The note behind it shows the pieces, the method and the dates.

How a line finds its note. In UK and IFRS accounts, statement lines usually carry a note number. A US 10-K usually does not: Apple’s statements print no note numbers, and the note’s title names what it covers (Note 9, “Debt”, sits behind the two “term debt” lines).

In a US 10-K the notes are in Item 8, straight after the statements; the auditor’s report comes after them in Apple’s filing and before the statements in many others. In UK and IFRS accounts the section is usually called “notes to the financial statements” and works the same way.

Size tells the story. In Apple’s fiscal 2025 10-K, five statements (operations, comprehensive income, balance sheet, shareholders’ equity and cash flows) are followed by 13 notes that run three times as many pages. The measured count is in the original data below.

What’s inside: Apple’s 13 notes as a map

Apple’s list is a typical shape for a large US company, though the order and titles vary between filers:

1. Summary of significant accounting policies
2. Revenue
3. Earnings per share
4. Financial instruments
5. Property, plant and equipment
6. Consolidated financial statement details
7. Income taxes
8. Leases
9. Debt
10. Shareholders’ equity
11. Share-based compensation
12. Commitments, contingencies and supply concentrations
13. Segment information and geographic data

Note 1 sets the rules for everything after it. Apple’s is short: the basis of preparation, its fiscal calendar, and one-line policies for revenue, share-based pay, cash equivalents, receivables, marketable securities, inventories (first-in, first-out), property and equipment (straight-line depreciation), derivatives, income taxes and leases. Other companies write pages on each. Each policy is a choice within what accounting standards allow, and each moves reported profit.

Critical estimates are flagged by the company itself, but in a US 10-K they sit in MD&A. Apple’s “Critical Accounting Estimates” section in Item 7 names two areas, uncertain tax positions and legal and other contingencies, and sends the reader to Note 1 for the policies. Under IFRS the judgments and estimates usually appear inside the notes.

A worked example: three notes that change how Apple’s numbers read

Debt (Note 9). The balance sheet shows term debt as two lines at 27 September 2025: $12,350 million current and $78,328 million non-current, $90,678 million together.

Note 9 lists the principal by the year it falls due: $12,393 million in fiscal 2026, $10,078 million in 2027, $9,300 million in 2028, $5,235 million in 2029, $4,972 million in 2030 and $49,303 million after that, $91,281 million in all.

That schedule answers what the balance sheet cannot: when. Total liabilities say how much is owed, and the current versus long-term liabilities split only says whether it is due within a year. The full split by year is in the original data section below.

Income taxes (Note 7). Apple’s fiscal 2024 income statement shows a tax provision of $29,749 million, 24.09% of pretax income, against 14.72% the year before. The statement gives no reason.

Note 7 does: a one-time charge of $10.2 billion, net, from the European Commission’s State Aid Decision, made up of $15.8 billion payable to Ireland from escrow, less a $4.8 billion US foreign tax credit and an $823 million fall in unrecognized tax benefits. The read an income statement walk-through shows how that one note turns a “falling profit” year into an ordinary one.

The same note holds a figure that is not a line anywhere else: gross unrecognized tax benefits of $23.2 billion at 27 September 2025, up from $22.0 billion a year earlier, of which $10.6 billion would change the tax rate if recognized. These are tax positions Apple has taken whose benefit it has not booked, because it may not keep them.

Segments (Note 13). The income statement shows one company. Note 13 splits it into the five regions Apple manages it by (Americas, Europe, Greater China, Japan and Rest of Asia Pacific), with net sales and operating income for each, which is how a reader sees where growth came from.

How to read them in practice

Start with Note 1 and read it once for each company. Policies change rarely, so the first read does most of the work. After that, compare this year’s Note 1 with last year’s: a changed policy is disclosed there, and the press release on results seldom mentions it.

Then follow the biggest moves on the statements. Any line that changed by a lot, or flipped sign, has a note behind it. Apple’s tax line is the example above.

Then read three notes every time: debt (when the money is due), commitments and contingencies (what is not on the balance sheet), and segments (where the profit comes from). Apple’s Note 12 lists $13,308 million of unconditional purchase obligations that are off the balance sheet, and states that management saw no reasonable possibility of a material loss from its legal claims beyond what it had accrued.

For companies that buy other companies, add the acquisitions and goodwill notes. They show what was paid and how much of it became goodwill, which is the only place that history is kept.

For profit questions, the income tax and share-based compensation notes come next. Apple’s Note 11 covers the stock awards behind $12,863 million of share-based compensation in fiscal 2025, which is future dilution set out in shares and dollars.

What the notes are not

Not optional reading. They are part of the audited statements; the auditor’s opinion covers them.

Not in a fixed order. The required content is set by accounting standards and SEC rules, but each company chooses its numbering and titles.

Not the same as MD&A. Management’s discussion in Item 7 explains results in management’s words. The notes are the accounting record, written to the standards.

The original data

Apple’s notes are about 8 times as long as its statements. Counting runs of letters in the filing text, leaving out page footers, from the statement of operations heading to the start of Note 1, the statements hold about 680 words; from Note 1 to the auditor’s report, the notes hold about 5,400. By Apple’s own index, that is 5 pages (29 to 33) against 15 (34 to 48). The rest of the statements are figures, which is the point: the words that explain them are in the notes.

Of the $91,281 million of principal in Note 9, 45.99% ($41,978 million) falls due within five years and 54.01% after fiscal 2030. The largest single year is fiscal 2026, at $12,393 million. The balance sheet total is $90,678 million, $603 million less than the principal, because the carrying amount nets off $309 million of unamortized discount and issuance costs and $294 million of hedge accounting adjustments; the note shows both lines.

The same note gives a third measure of the same debt. Its fair value, from market prices, was $80.4 billion at 27 September 2025, below both the principal and the carrying amount. A reader of the balance sheet alone sees one of the three.

Where the figures come from. The schedule, the balance sheet debt lines and the unrecognized tax benefits are Apple’s own XBRL facts in that filing and match the printed tables. The State Aid figures are quoted from Note 7 and from the fiscal 2024 10-K. One company is one example, not a rule: a bank or an insurer with complex instruments runs much longer, and a small company shorter.

When it fails

Reading ratios without the notes. A debt ratio built from the balance sheet total treats $12,393 million due next year and $49,303 million due after 2030 as the same thing. The notes are where that difference shows.

Missing a policy change. It is disclosed in a note and almost never in the headline results. A profit gain that came from a new revenue or depreciation policy looks the same as an operating one in a press release.

Treating an estimate as a measurement. Tax reserves and legal provisions are management’s judgment, which is why Apple lists both as critical estimates. Its $23.2 billion of unrecognized tax benefits is an estimate that moved by $1.2 billion in one year.

Ignoring what is described but not booked. A contingency that could not be measured reliably has no number on the balance sheet. That does not make it small; it makes it unmeasured.

Comparing two companies’ ratios without comparing their policies. Different permitted choices produce different figures from similar businesses, so the comparison can be wrong before any arithmetic starts.

Reading the notes once and never again. Policies, segments and debt terms change. The useful read is this year’s note next to last year’s, line by line.

Questions people ask

What are notes to the accounts?

They are the numbered explanations that follow the financial statements: accounting policies, breakdowns of totals, schedules such as debt maturities, and items not recorded on the balance sheet.

Are the notes part of the financial statements?

Yes. They are covered by the auditor’s opinion, along with the balance sheet, income statement, cash flow statement and statement of equity.

Where are the notes in a 10-K?

In Item 8, right after the statements. In Apple’s fiscal 2025 10-K they start on page 34 and run to page 48, with the auditor’s report after them; many other companies put the auditor’s report first.

Which note should I read first?

Note 1, the summary of significant accounting policies, because it defines how every other figure was measured.

Related

The annual report and the 10-K are the documents the notes sit in. The balance sheet is the statement whose lines the debt, lease and tax notes break down. The income statement depends on the revenue and tax notes. For how profit becomes the equity line, see retained earnings; for the profit measure that strips out tax entirely, see operating income.

This page is educational, not financial advice. Test every idea on your own charts before risking money.