Discuss why full disclosure is important in accounting/financial reporting.

Expert Solution

Full disclosure means that there should be full ,fair and adequate disclosure of accounting information.Thus,the convention of full disclosure suggests that every financial statement should fully disclose relevant information.

The business provides financial information to all intersted parties like investors,lenders,creditors,shareholders would like to know profitability of the firm .In the same way ,other parties would be intersted in the financial information according to their requirements.This is possible if financial statements disclose all relevant information without any window dressing.

If the company is making any changes it shouls also be provided as an additional information in financial ssstement.For example- Any change in the method of depreciation,basis of valuation of assets and creating any reserve in balance sheet.

Full disclosure convention also plays major role in meaningful comparison of financial statements of the different business units.It helps investors for making investment decision .Full disclosure also helps in comparison of financial statements to different years of the same business unit.

ekkarill92 answered 2 years ago

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