Full disclosure principle

Definition

The full disclosure principle mandates that financial statements must include all relevant information that could impact a reader’s understanding of the statements. It ensures transparency and completeness in financial reporting.

5 Must Know Facts For Your Next Test

1. 1. The full disclosure principle applies to both qualitative and quantitative information.
2. 2. Footnotes are commonly used to provide additional details under this principle.
3. 3. It helps prevent misleading financial statements by ensuring all pertinent data is included.
4. 4. This principle is governed by accounting standards such as GAAP or IFRS.
5. 5. Disclosures may include details about accounting policies, pending lawsuits, or subsequent events.

Review Questions

Related terms

GAAP:

Generally Accepted Accounting Principles, a set of rules governing financial statement preparation in the U.S.

Footnotes: Additional notes provided in financial statements that offer further detail on specific items within the main reports

Subsequent Events: Significant events occurring after the balance sheet date but before the issuance of financial statements