Full Disclosure Principle of Accounting

The full disclosure principle states that while designing and maintaining financial statements of an entity you should add all the information that is necessary to develop an understanding regarding the financial matter of the entity. However the implementation and the interpretation of this principle varies from one company to the other as the accounting information of the firm is quite massive so disclosure only includes that information that has a direct affect on the financial position and the financial matter of the entity.

The disclosure must contain all the information that is not quantifiable such as the dispute of the financial entity over taxable income must be entered in disclosure so that user can develop an understanding regarding this matter. In addition to that existing lawsuits must also be mentioned in the disclosures. Full disclosure also states that you mentioned all the existing accounting policies in your disclosure moreover a change in these policies must also be reported in the disclosure later. Examples of full disclosure can be explained as under:-

  • A change in the accounting principle and a justification that change
  • A detail of all the non-monetary transactions
  • The degree and the nature of relationship with other financial parties with which considerable financial transactions are carried
  • The amount of impeded assets
  • All the details associated with asset retirement

The full disclosure information can be stored in variety of places in the given financial statements such as balance sheets and income statements or it can be released in the form of accompanying disclosures.

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