What it is
Note 1 tells readers how the entity applies US GAAP and where management exercises judgment. A private company note covers the nature of operations, basis of presentation, estimates and the policies for each significant line item. Poorly tailored text stays in the file for years because nobody rewrites it.
This shell gives wording for fifteen sections with bracketed choices for each common alternative, such as inventory cost method, goodwill treatment for private companies, pass-through versus taxable entity and lease elections. Delete what does not apply and replace the rest with the entity’s facts.
When to use it
- When drafting the first set of statements for a new entity.
- At each year end, to refresh the note against the entity’s actual policies.
- When an accounting change or new standard needs a policy paragraph.
What’s inside
- Nature of operations, basis of presentation, use of estimates and cash
- Receivables and credit losses, inventory, property, leases, goodwill and intangibles
- Revenue, income taxes (taxable and pass-through versions) and fair value
- Concentrations, subsequent events and a recent pronouncements table
- Preparer and reviewer sign-off
Standard cited
This template follows ASC 235 / US GAAP. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
Does the note have to cover every line item?
It covers the policies that matter to understanding the statements. Omit policies for items the entity does not have, and add policies for industry-specific items the shell does not list.
Can a private company elect different goodwill treatment?
Yes. The private company alternative allows amortization of goodwill over a chosen period with impairment testing on a triggering event. The shell has both versions.
Which date goes in the subsequent events paragraph?
The date through which events were evaluated. It is the date the statements were issued, or the date they were available to be issued for entities that do not file with the SEC and meet the conditions for that choice.
Should the note repeat standard text from last year?
Only if it still describes the entity. Compare it to current practice each year and update estimates, elections and the pronouncements table.
Related templates
- Financial Statement Notes Template (US GAAP)
- Accounting Change and Policy Election Memo (ASC 250)
- GAAP Disclosure Checklist (Private Company, Short Form)
- Financial Statement Shell: Balance Sheet, Income, Equity and Cash Flows
Last updated 11/05/2026. All free templates.