Full Disclosure The full disclosure principle calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader (Kieso, Weygandt, & Warfield, 2012). Full disclosure must be used by all publicly traded companies and is required by the SEC (U.S. Securities and exchange Commission’s). In this system, financial statement users are provided with material information, it improves timeliness and quality of information disclosed, and discourages fraud in the public market. A way to understand full disclosure is, would you want to buy something that you have not seen or tested out? It goes the same for investors, they do not want to invest into a company without seeing their financial statements because the company could be going bankrupt and the investor would be wasting their money. In the past decade the regulations for full disclosure has greatly evolved. The way technology has evolved and businesses increased the old regulations no longer worked. Poor data quality reporting standards have greatly affected the economy and businesses. The accounting systems create over the years give accountants a better way to display the adequate information in the financial statements. If a mistake has been made it is easier now to change a number on a computer rather than having to change numbers on all the papers created. Another reason technology has improved with full disclosure, is investors no longer have to wait for information to be published or sent in the mail. Investors can now get on the internet to see the financial statements and have the company e-mail them copies of the statements which would take less than five minutes to receive. Full disclosure is important in financial reporting to show users how well a company is succeeding. The financial statements are very important to investors and anyone who is interested in the company. As said before, investors want to look at the financial statements before they invest into the company, because they are doing it to make money. If they company is not making any profit then the investors would be wasting their time and losing money. Financial statements can also be important to customers and suppliers because they want to make important business or strategic decisions, but wouldn’t know what route to go without the financial statements. Important parts of the full disclosure principle are as follows:
All the accounting policies should be disclosed because it helps viewers understand the financial statements.
Details of contingent liabilities, contingent assets, legal proceedings, etc. are also relevant to the decision making of users and hence need to be disclosed
If there are any significant events occurring after the date of financial statements but before there is an issue it needs to be…