Full Disclosure Essay

726 WordsMay 13, 20133 Pages
Full Disclosure The full disclosure principle in accounting requires all information, past, present, and future, to be disclosed to users of financial statements that is substantial enough that it may affect the financial performance of the company (Kieso, Weygandt, & Warfield, 2007). If the information is substantial enough that it can influence the decision of creditors or investors, the information is to be disclosed in company financial reports. This information should be presented in the footnotes of company financial reports in a manner that is concise and of such that a reasonable user of financial statements can understand them. Full disclosure has increased over the last 10 years because of increased requirements from organizations, such as the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB). Scandals and fraud that have taken place in entities, such as Enron and WorldCom have contributed to the increase in disclosure requirements. Another reason for the increase in full disclosure over the last 10 years is the increase in need for users of financial information to be available as quickly as possible. Many companies operate on a global scale. Therefore, changes in company financial position have become more susceptible to changes in the global community. Because of the increased need of fully disclosed information by creditors and investors, the SEC and FASB has increased requirements for companies in relation to the full disclosure principle in accounting. Creditors and investors are continually in need of fully disclosed financial information to make informed decisions in relation to company financial health. One contributor to the need for requirements in full disclosure is the increased complexity of financial instruments a company may possess that make up its financial assets. Because of these complex

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