ACC 421 Intermediate Financial Accounting

916 Words4 Pages
Full Disclosure Paper Gabriela Jimenez ACC/421 Intermediate Financial Accounting I Instructor: Beverly Halfacre Due on 03/17/08 What is the full disclosure principle in accounting? The full disclosure principle is a principles from the Generally Accepted Accounting Principles (GAAP) – where the amount and kinds of information disclosed should be decided based on trade-off analysis as a larger amount of information costs more to prepare and use. Information disclosed should be enough to make a judgment while keeping costs reasonable. Information is presented in the main body of financial statements, in the notes or as supplementary information The full disclosure principle states that any future event that may or will occur, and that will have a material economic impact on the financial position of the business,…show more content…
In fact, like other professions, personal values come into play in the accounting decisions and judgments made by the decision makers, so full disclosure might mean different things to different people. Legal checklists have mandatory items, but the financial picture might still be vague or lack numbers to give an accurate financial representation of the company at any given time, as shown in the financial statements. For example, if it was totally “objective,” Enron’s accountant would not have been able to “cook” the books to make the company appear to be in a better financial position than it actually was. The accountant and other Enron professionals would not have ended up in court for fraud and the likes. Even though the accounting profession has guiding principles (GAAP), they are not absolute, but subject to human judgment and interpretation and, at times, the lack of compliance leads to fraud (e.g., Enron, WorldCom, and others). The human free will comes into play, as witnessed in the Enron case; principles were NOT applied or complied
Open Document