FULL DISCLOSURE PRINCIPLE
Kimberly Dixon 12/10/12
What is the full disclosure principle in accounting, why has disclosures increased substantially in the last 10 years, and regulations that are being increased and put into place. These are the three areas of the full disclosure principle that will be discussed in this paper. First, what is the full disclosure principle in accounting? The full disclosure principle is the principle that states that a company must include in its financial statements all information that would affect an informed readers understanding of the financial statements. Items that fall under this principles requirement include any event that will have a material impact on the company’s financial position or financial results. Also items that cannot be quantified at the present time can be disclosed. Examples of this include outcomes of existing lawsuits and disputes with the government over the companies tax position. Another required item to this principle is the disclosure of all existing accounting policies used within the company, along with any changes the company makes to these policies. The purpose of the full disclosure principle in accounting is to make sure that all information imperative to the understanding of the different financial aspects that can not be quantified at the present time are represented and known to the informed readers of the financial statements being presented. Second, why has the full disclosure principle increased substantially in the last 10 years? There are three main reasons for this substantial increase over the past 10 years. The first reason is because there are more complex business environments. Examples of things that make business more complex includes leasing options, deferred tax options, and financing arrangements. These are just a few of the reasons business environments have become much more complex. The ...