Notes to the annual financial statements as an essential informational basis for decision- making in construction enterprises

Abstract

Introduction. As a result of the full-scale war, the construction industry has found itself in an extremely difficult situation. The loss of investors, disruption of supply chains, and the population’s insolvency have led to construction enterprises being on the verge of collapse. At the same time, this industry has significant development prospects, as it is an important sector of the economy that aids infrastructure development and housing construction, provides employment opportunities, and creates a multiplier effect for related industries. In this context, the quality disclosure and spread of information about the activities of construction enterprises in financial statements becomes particularly important for decision- making by both external and internal users. Notes to the annual financial statements are the tool that enables a more precise reflection of the impact of war on business activities, in addition to explaining changes in asset value, unfulfilled obligations, and development prospects. Improving this reporting format is a crucial prerequisite for improving information transparency, strengthening investor confidence, attracting international aid, and ensuring effective management.

Purpose. The purpose of the research is to find ways to improve and enhance the analytical capacity of the Notes to the annual financial statements of construction enterprises to form high-quality information support for making well-grounded decisions by external and internal users.

Methods. To achieve the research goal, the following methods were used: Trend and comparative analysis - to determine the impact of the full-scale war on the activities of construction enterprises; Abstract-logical reasoning, induction, and deduction - to explore the role of notes to the annual financial statements as a source of extended, detailed, and analytical information; Modelling, grouping, analysis, and synthesis - to improve the procedure for presenting information in the notes; Systemic approach and analogy - to identify principles that should form the basis of this reporting format.

Results. An assessment of the state of the construction industry in Ukraine was conducted, and the impact of the war on the performance of construction enterprises was studied. The role of the Notes to the annual financial statements as a source of expanded and analytical information about the activities of enterprises for making managerial and investment decisions was assessed. Current problems in the formation of notes to annual financial statements were examined. The structure of the information that should be reflected in the notes was proved, and the necessity of organising this information was substantiated. This will contribute to the formation of high-quality data about the enterprise’s activities and reduce information asymmetry. The importance of adhering to the principles of full disclosure and cost-efficiency when compiling the notes was proven, and the necessity of ensuring the maximum completeness of information that may influence decision-making was proven, taking into account its real value and confidentiality.

Prospects for further research. Further research requires analysis of financial statement items and indicators regarding the necessity of their detailing in the notes to ensure compliance with accounting standards and the informational needs of financial statement users.

Keywords: financial reporting, Notes to the annual financial statements, information users, financial reporting principles, construction enterprises, construction contracts.