The financial accounting term contracts and negotiations refers to supplemental information appearing in a company's financial statement. These explanations provide insights into restrictions or agreements associated with certain assets or liabilities.
Contracts and negotiations are one of several types of information that is supplementary to the items appearing on a company's balance sheet or income statement. Examples of these disclosures include:
Providing information on the status of materially significant negotiations or contracts with other parties helps the reader of a financial statement to understand the potential impact such agreements can have on the company in the future. For example, the requirements of a capital lease, or the provisions of a pension plan can have noteworthy impact on the earnings of the company in the years ahead.
Accounting practices mandate the need to disclose any information that can have a material effect on an enterprise.