October 8, 2012
Abstract: The purpose of this paper is to Answer Question 2 in chapter 24 of Intermediate Accounting; explain the need for full disclosure in financial reporting and to identify the possible consequences of failing to properly disclose certain items in financial statements.
Full Disclosure Paper
Ch. 24 – Question 2
“What is the full disclosure principle in accounting?” According to our text, “the full disclosure principle calls for the financial reporting of any financial facts significant enough to influence the judgment of an informed reader” (Intermediate Accounting, 2010). “Why has disclosure increased substantially in the last 10 years?” There is no one reason why disclosures have increased substantially in the past 10 years; according to our text, “the reasons for this increase in disclosure requirements are varied, some reasons may be the complexity of the business environment, the necessity of timely information, or the accounting as a control and monitoring device” (Intermediate Accounting, 2010).
Need for Full Disclosure in Financial Reporting
What people have understand is that there is more to full disclosure then just a financial statements and the notes that come with the statements, that statement themselves disclose information such as revenues, earnings per share, etc. Full disclosures are needed because those that use financial statements of an organization rely on the information to be accurate and not false or misleading. A lot of money could be lost by an organization which makes the investors trust decrease. Full disclosures were created to protect the safety of businessmen and investors. Full disclosures exist so that people from potential investors to executives can be made aware of the financial status of the organization. If full disclosures didn’t exist, some companies may try to with hold information that may bring forth a negative light upon...