Explore BrainMass
Share

Full disclosure principle

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

What is the full disclosure principle in accounting? Why has the disclosure increase substantially in the last 10 years?

Include the need for full disclosure in financial reporting and identify possible consequences of failing to properly disclose certain items in financial statements.

© BrainMass Inc. brainmass.com December 19, 2018, 10:00 pm ad1c9bdddf
https://brainmass.com/physics/heinsenburgs-uncertainty-principle/full-disclosure-principle-77913

Solution Preview

What is the full disclosure principle in accounting? Why has the disclosure increase substantially in the last 10 years?

The full disclosure principle calls for financial reporting of significant facts affecting the judgment of an informed reader. Thus this principle require accurate and complete information material the organization must be made available.

Greater focus on corporate governance

With the recent debacle of various organizations like ENRON, WorldCom and also there was questionable role of financial reporting. Thus there is a greater stress on the corporate's social/ethical responsibilities, it encompasses:

* The environment it operates in
* The employees with which it survives
* The Market for which it exists
* The community which provides it with the basics to grow

Corporations that treat environment with respect leave little waste for the environment to consume, have efficient processes, low energy costs, high degree of recycling, high product quality, high social standing and high levels of customer satisfaction. It becomes a Win-Win Strategy for the corporate enabling them to improve their environmental or social record while reducing costs and/or increasing competitiveness and productivity.

Full disclosure enables the investor to evaluate the credit quality of an issue. Reasons for increasing reporting requirements:
Increase in complexity of the business environment (derivatives, business combinations, pensions)
Greater Necessity for timely information (interim data, forecasts)
Accounting greatly used as a control and monitoring device

Include the need for full disclosure in financial reporting ...

Solution Summary

This explains the Full disclosure principle

$2.19