Full Disclosure Principle

Full disclosure principle in accounting is used in financial statements as the balance sheet, income statement and statement of cash flow, and contains financial facts noteworthy enough to influence the judgment of a knowledgeable reader, such as a lender. If certain information is thought to be important or valuable to an investor or lender with intents of using the financial statements, that information could be disclosed in one of the statements or in the notes to the statement being looked at. It is for the reason of basic accounting principles that there are an additional number of pages with summaries often attached to financial statements. Manipulators find material about financial position, income, cash flows, and investments in one of three places; inside the main body of financial statements, in the notes to those statements, or as complementary information.

The notes may encompass massive amounts of information, contingent to the statement or report being viewed, but are not restricted to information on debt, going concern, accounts, contingent liabilities, or circumstantial information explaining the financial numbers. The reason for the use of notes is for effects like earnings and cash flows being readily available in financial statements, but investors could do better by viewing the appraisals of other companies in the same industry then making a well informed decision.

An area where a full disclosure would be great to have is when there are times that lawsuits turn out to be obvious to companies. In a report the company would want to include information, like worries about the lawsuit or if it thinks that it would have to pay or be out of the woods in the end, which to some users (if not all), is significant. People who are attentive to the company would like to have this information. If it was concealed, the user could not know the truth about the company that they would be interested in investing on. In some situations, the benefits of disclosure can be obvious, but the costs are unclear, where in other cases, the costs can be definite, but the benefits are not as apparent.

Disclosure has improved because of the intricacy of the business atmosphere, the requirement for opportune information, and the longing for more information on