Formula field visibility of referenced data
Key Takeaway
Formulas don't respect the security on referenced data, so apply field-level security to the formula field itself, not to the source field.
A formula field calculates its value from other fields, and those fields can live on the same record or on related records. Users see the formula's result even when they could not see the source data directly.
What a cross-object formula is
A cross-object formula spans two related objects and references merge fields on those objects. It works on the detail side of a master-detail relationship, where it pulls fields from the master (parent) object. It also works with lookup relationships.
A cross-object formula can reference fields on objects up to 10 relationships away. One formula can therefore show data from records far from the one the user is viewing.
Cross-object formulas work anywhere formulas are used, except when creating default values.