Full Disclosure Paper
The textbook defines full disclosure principle as, “An Accounting principle that dictates that in deciding what information to report, companies follow the general practice of providing information that is of sufficient importance to influence the judgment and decisions of an informed user. It recognizes that the nature and amount of information included in financial reports reflects a series of judgmental trade-offs between sufficient detail that makes a difference to users, sufficient condensation to make the information understandable, and the costs and benefits of providing the information”. Full disclosure principles are hard to enforce because of the cost that is usually associated with such enforcement. “The cost can be substantial and the benefits difficult to assess. Disclosure requirements have increased because of the growing complexity of the business environment, the need for timely information, and the use of accounting as a control and monitoring device”. In some cases, the benefits associated can be easily determined, while the cost is uncertain. In other cases, the cost associated can be easily determined, while the benefit is uncertain.
Individuals who use financial statements for a company know that full disclosures are important. The information on the full disclosure should be exact and not misleading. Incorrect financial information can have a negative effect on a company, or even the entire economy, causing the loss of billions of dollars to corporations and investors. Investors may lose trust in the economy if full disclosures are misleading. Companies face penalties when they fail to provide the required items in their financial statement such as the supplemental balance sheet. The four sections included in the supplemental balance sheet are contingencies, accounting policies, contractual situations, and fair values. There are consequences associated...
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