Full Disclosure Principles
What is the full disclosure principle in accounting? Why has disclosure increased substantially in the last 10 years?
The full disclosure principle gives financial facts in financial reporting to help give the reader a clear judgment of the report. This is a difficult task because full disclosure within a company can be costly. The benefits of this principle are not easy to assess. The full disclosure is an information overload. The purpose of disclosure is to prepare current and future investors of the financial risk that the business may face. A business should look into everything that is available to get current and future performance of the company. If an event is unlikely to occur the company does not have to disclose this information. …show more content…
Information is needed in a timelier manner and because accounting is used as a control and monitoring device the requirements have increased. The expansion of disclosures about their specific agreements has been required by the SEC. Companies have committed fraudulent actions by withholding information or falsifying the reports which is against the full disclosure principle. There are companies, such as Enron and World Com, which played a part in fraudulent acts which influenced the SEC to enforce the full disclosure principle. The reporting requirements are so detailed that companies would have to hire in more employees specifically for full disclosure portion of the company to make sure policy is …show more content…
The Sarbanes-Oxley Act of 2002, for example, has certain requirements for how the data is presented in the reports. This helps to make sure the information is organized and reported properly. The disclosure is to make sure current or future investors know the information is accurate. Failure to disclose information properly can alter the judgment of the investor. This is an ethical concern for the company. The company can be charged with fraud for not disclosing information such as Enron for example. Fraudulent reporting can be intentional or unintentional but either way there are consequences. The SOX has provisions to keep fraudulent financial reporting from happening. If the GAAP is not always available in a business or the business not in compliance, the companies tend to encounter fraudulent activity and may not even know it. This leads to imprisonment and the possible closing of the business. The investors will not trust the company after a scandal like misrepresenting or not disclosing all financial information in a business, especially one that will alter
The full disclosure principle gives financial facts in financial reporting to help give the reader a clear judgment of the report. This is a difficult task because full disclosure within a company can be costly. The benefits of this principle are not easy to assess. The full disclosure is an information overload. The purpose of disclosure is to prepare current and future investors of the financial risk that the business may face. A business should look into everything that is available to get current and future performance of the company. If an event is unlikely to occur the company does not have to disclose this information. …show more content…
Information is needed in a timelier manner and because accounting is used as a control and monitoring device the requirements have increased. The expansion of disclosures about their specific agreements has been required by the SEC. Companies have committed fraudulent actions by withholding information or falsifying the reports which is against the full disclosure principle. There are companies, such as Enron and World Com, which played a part in fraudulent acts which influenced the SEC to enforce the full disclosure principle. The reporting requirements are so detailed that companies would have to hire in more employees specifically for full disclosure portion of the company to make sure policy is …show more content…
The Sarbanes-Oxley Act of 2002, for example, has certain requirements for how the data is presented in the reports. This helps to make sure the information is organized and reported properly. The disclosure is to make sure current or future investors know the information is accurate. Failure to disclose information properly can alter the judgment of the investor. This is an ethical concern for the company. The company can be charged with fraud for not disclosing information such as Enron for example. Fraudulent reporting can be intentional or unintentional but either way there are consequences. The SOX has provisions to keep fraudulent financial reporting from happening. If the GAAP is not always available in a business or the business not in compliance, the companies tend to encounter fraudulent activity and may not even know it. This leads to imprisonment and the possible closing of the business. The investors will not trust the company after a scandal like misrepresenting or not disclosing all financial information in a business, especially one that will alter