Full Disclosure Paper
Financial reporting is a necessary to have in a market for it to function properly. Truthful, clear, and complete reporting of financial statements are important to investors and any others who are interested in how the company is performing financially. Financial statements provide the framework for how a company is operating. The full disclosure principle has made financial reporting significant for the reader understand. Investors want to know that a company is honest and upfront with them about their how their company is operating. Dishonest companies lead to mistrust by investors and lead to investors taking their money from other companies in the future. In this paper, it will discuss an important aspect of financial reporting.
Full Disclosure Principle
The full disclosure principle “calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader.” (Kieso, Weygandt, & Warfield, 2013, p. 1488). The information disclosed are events that are likely to have the impact on a company’s financial position or results. For example, if a company withheld information from investors that could have made an impact on how the individuals invested in the company. The Generally Accepted Accounting Principles (GAAP) requires that all of a company’s financial records and transactions be available for viewing for interested individuals. The full disclosure principle increased substantially in the last ten years because of the Sarbanes-Oxley Act (SOX). The SOX Act passed due to a string of accounting scandals. The law increased the resources for the Securities and Exchange Commission (SEC) to combat fraud and poor reporting practices.
Need for Full Disclosure
The need for full disclosure in financial reporting demands Individuals, investors, creditors and others can be made aware of the financial situation of the company. Without full...