The full disclosure principle states that financial records should include all of the information necessary for readers to understand those records. This is a largely subjective principle, but full disclosure doesn't mean that records should include irrelevant information.Continue Reading
In accounting, the full disclosure principle is a concept that allows those reading a company's financial records to understand what they're reading. The information disclosed according to this principle can appear in a variety of formats, including footnotes, appendices and schedules within financial statements.
This information can also be included outside of financial statements, such as in annual reports to government bodies, press releases, shareholder meetings and public interoffice communications. This means that, though the supplemental and explanatory information should be available, it doesn't have to be written alongside financial records.
In addition to providing context for understanding financial records, the full disclosure principle concerns corporate transparency and ethics. However, this doesn't mean that over-reporting of information is necessary; rather, the full disclosure principle is meant to increase efficiency. Reporting things like changes in accounting procedures or the effects of inflation aren't strictly necessary according to the conventions of the full disclosure principle. Seattle Central University summarizes that the inclusion of a full disclosure is a way for smart investors to make informed decisions about a company's success.
Rules regarding full disclosure may change over time, but the concept behind the principle has largely stayed the same.Learn more about Accounting
External users of accounting information are parties outside the operation of a business who use its accounting and financial information in making important decisions. Examples include customers, investors, tax authorities, creditors and regulatory authorities. Since these users do not have direct access to accounting information, they are given access to records by the business in the form of financial statements.Full Answer >
The main advantages of an accounting information system are the increased speed of processing the numbers, efficient organization, and classification and safety of inputted data. This contrasts the manual evaluation of information, which involves writing out the data by hand and doing time consuming calculations.Full Answer >
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One common accounting term is materiality, which is the measure of how significant a piece of information is to the important financial decisions within a company. Material information includes any relevant information regarding business decisions, and accountants must include all material information on financial statements.Full Answer >