A company’s balance sheet, income statement, and statement of cashflows can reveal a wealth of information about a company, but it’s in the footnotes where the best information is.  That’s not an original thought, nor is what follows of my own concocting.

We get a daily e-mail from Hedgeye Risk Management, and it’s usually interesting, often unconventional.  Here is an excerpt from today’s.  My contribution to it is the emphasis.

As a financial analyst, I have learned that all of the real juicy stuff can be found in a company’s footnotes. I’m not claiming to have read all of the 2009 Financial Report of the U.S. Government, but the footnotes and the statement of the comptroller general of the United States are alarming. Anybody reading them would come to the conclusion that the US government is a short.

Consider the report’s covering Statement of the Comptroller of the United States, the overseeing accounting authority, where “material” questions are raised in terms of the valuation of the bailout liabilities and assets. According to, Gene L. Dodaro, Acting Comptroller General:

“The economic recession and the federal government’s unprecedented actions intended to stabilize the financial markets and to promote economic recovery have significantly affected the federal government’s financial condition. The resulting substantial investments and increases in liabilities, net operating cost, the unified budget deficit, and debt held by the public are reported in the U.S. government’s consolidated financial statements for fiscal year 2009. Because the valuation of these assets and liabilities is based on assumptions and estimates that are inherently subject to substantial uncertainty arising from the uniqueness of certain transactions and the likelihood of future changes in general economic, regulatory, and market conditions, actual results may be materially different from the reported amounts. Further, the ultimate cost of these actions and their impact on the federal government’s financial condition will not be known for some time.”

Or how about this one….

Certain material weaknesses in internal control over financial reporting and other limitations on the scope of our work resulted in conditions that prevented us from expressing an opinion on the fiscal year 2009 and 2008 financial statements other than the Statements of Social Insurance. ”

The internal controls of the US Government are so bad the books can’t have an official opinion from the Comptroller of the United States.


2 Responses to “Footnotes”

  1. Todd Enders says:

    Glad you liked today’s Early Look, Craig. Astonishing that the sort of thing that might get a company de-listed passes without comment in America. Wanted to make sure you and your readers knew that we’ve launched a product for Individuals and investment advisors, and are starting off by offering a free two-week trial at Keep up the good work!


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