full disclosure principle

Examples of full disclosure principle in the following topics:

• Full-Disclosure Principle

  • The full disclosure principle states information important enough to influence decisions of an informed user should be disclosed.
  • The full disclosure principle states that information important enough to influence the decisions of an informed user of the financial statements should be disclosed.
  • Another aspect of completeness is fully disclosing all changes in accounting principles and their effects.
  • As an accountant, the full disclosure principle is important because the notes to the financial statements and other financial documents are subject to audit.
  • To obtain an unqualified (or clean) opinion, one must have an intrinsic understanding of the full disclosure principle to insure sufficient information for an unqualified opinion on the financial audit.

• Events Triggering Disclosure

  • Consistency generally requires that a company use the same accounting principles and reporting practices through time.
  • This concept prohibits indiscriminate switching of accounting principles or methods, such as changing inventory methods every year.
  • When a company makes a change in accounting principles, it must make the following disclosures in the financial statements (in the Notes to the Financial Statements):
  • Events that trigger disclosure should be based on an accountant's assessment of materiality, especially when facing decisions related to the full disclosure principle.
  • Events that trigger disclosure should be based on materiality and the full disclosure principle

• Introduction to GAAP

  • Monetary Unit Principle: assumes a stable currency is going to be the unit of record.
  • This is also know at the stable dollar principle.
  • Also, under this principle a company should establish an allowance for bad debt account.
  • Full Disclosure Principle: Amount and kinds of information disclosed should be decided based on trade-off analysis as a larger amount of information costs more to prepare and use.
  • Consistency principle: the company uses the same accounting principles and methods from year to year.

• Mechanics of a Disclosure

  • That is where the disclosures on the financial statement come into play.
  • The disclosures can be required by generally accepted accounting principles or voluntary per management decisions.
  • This information must be noted in the disclosure.
  • Other items requiring disclosure are noteworthy events and transactions.
  • Voluntary disclosure in accounting is the provision of information by a company's management beyond requirements, such as generally accepted accounting principles and Securities and Exchange Commission rules, where the information is believed to be relevant to the decision making of users of the company's annual reports.

• Current Issues in Reporting and Disclosure

  • Accountants must stay up to date with current issues in reporting and disclosures related to standards set by regulatory agencies.
  • Accountants must stay up to date with current issues in reporting and disclosures related to standards set by regulatory agencies.
  • Fair value accounting has been a part of Generally Accepted Accounting Principles (GAAP) in the United States since the early 1990s and used increasingly since then.
  • Accountants must stay up to date with current issues in reporting and disclosure.
  • Give some examples of current issues in reporting and disclosure that an concern an accountant

• Gain Contingencies

  • The disclosure of gain contingencies is affected by the materiality concept and the conservatism constraint.
  • For example, an auditor expresses an opinion on whether financial statements are prepared, in all material aspects, in conformity with generally accepted accounting principles (GAAP).
  • Most accounting principles follow the conservative constraint, which encourages the immediate disclosure of losses and expenses on the income statement.

• What Goes on the Balances Sheet and What Goes in the Notes

  • Accounting principles can sometimes require the disclosure of specific information for the benefit of the financial statement user.
  • For example, companies that pay pension plan benefits require additional footnote disclosure that provide the user with additional details on pension costs and the assets used to fund it.

• Differences Between GAAP and IFRS and Implications of Potential Convergence

  • A major difference between GAAP and IFRS is that GAAP is rule-based, whereas IFRS is principle-based.
  • A major difference between GAAP and IFRS is that GAAP is rule-based, whereas IFRS is principle-based.
  • With a principle based framework there is the potential for different interpretations of similar transactions, which could lead to extensive disclosures in the financial statements.
  • Although, the standards setting board in a principle-based system can clarify areas that are unclear.
  • State the difference between Generally Accepted Accounting Principles and International Financial Reporting Standards

• Defining Accounting

  • The principles of accountancy are applied to business entities in three divisions of practical art: accounting, bookkeeping, and auditing.
  • The earliest extant evidence of full double-entry bookkeeping is the Farolfi ledger of 1299-1300.
  • This development resulted in a split of accounting systems for internal (i.e., management accounting) and external (i.e., financial accounting) purposes, and subsequently also in accounting and disclosure regulations, following a growing need for independent attestation of external accounts by auditors.
  • The body of rules that governs financial accounting in a given jurisdiction is called Generally Accepted Accounting Principles, or GAAP.

• Importance of Recognition and Measurement

  • In accounting, recognition of revenues and expenses is based on the matching principle.
  • The revenue recognition principle and the matching principle are two cornerstones of accrual accounting.
  • In contrast to recognition is disclosure.
  • The matching principle is a culmination of accrual accounting and the revenue recognition principle.
  • According to the principle, expenses are recognized when obligations are: