Full disclosure principle: the full disclosure principle requires all information and values pertaining to the financial position of a business must be disclosed in the records. Especially for certain information that is important to an investor or lender using the financial statements, that information should be disclosed within the statement or in the notes to the statement. What if the important information is hided off the statements? If the company suffering a big loss, the investors would have be not willing to continue putting money in it, but investors do not get the information, and they stick with the company then they lose their money and opportunity of investing a more prosperous company. If the company experience a good year, and the good outcome was hided, like they underestimate the income, then the tax agency would collect less taxes. As the example in the question, the president wants to hide the reality that they hired a company to negotiate for a contract in Western Europe, it is not fair for investors who see the plan to enter Europe as high risk, they might give up the investment after knowing the reality.
Accrual basis accounting: In most cases, GAAP requires the use of accrual... [continues]
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