NTR in the context of financial statements, previously known as "Notice to Reader," refers to compiled financial statements, which offer valuable insights into a business's financial standing.
Understanding Compiled Financial Statements
Compiled financial statements are a type of financial statement that an accountant prepares based on information provided by the company's management. They do not involve any audit or review procedures. Because of this limited scope, they offer less assurance than audited or reviewed financial statements.
Key Characteristics of NTR (Now Compiled) Financial Statements:
- Based on Management's Data: The information comes directly from the company's records.
- No Assurance: The accountant does not verify the accuracy or completeness of the data.
- Limited Scope: The level of service is lower than an audit or review.
- Cost-Effective: Usually less expensive than audits or reviews.
- Valuable Insights: Compiled financial statements offer valuable insights into the financial standing of a business.
Why Use Compiled Financial Statements?
Compiled financial statements, formerly known as NTR statements, can be useful for:
- Internal Decision-Making: Helping management understand their financial performance.
- Tax Preparation: Providing a basis for preparing income tax returns.
- Small Businesses: Serving as a basic level of financial reporting for small companies.
- Loan Applications: Though likely to be viewed as less comprehensive than audited financials, they can be a starting point for certain loan applications.
Example
Imagine a small bakery needs financial statements for a small business loan. They might choose to have compiled financial statements prepared because they are less expensive than an audit. The accountant will take the bakery's financial records (income, expenses, assets, liabilities) and create the financial statements without independently verifying the data's accuracy.
