What is the full disclosure principle?

Definition of Full Disclosure Principle
The full disclosure principle requires a company to provide the necessary information so that people who are accustomed to reading financial information are able to make informed decisions regarding the company.

Examples of Full Disclosure Principle
The disclosures required under this principle can be found in a number of places, such as:

  • The company's financial statements including the notes to the financial statements and supplementary schedules
  • A publicly-traded corporation's annual report to the U.S. Securities and Exchange Commission (Form 10-K), especially the section entitled Management's Discussion and Analysis
  • Quarterly earnings reports, press releases and other communications

The notes to a company's financial statements will likely begin with a description of the company's significant accounting policies such as how and when revenues are recognized, how property is depreciated, how inventory and income taxes are accounted for, and more.

Other disclosures in the notes to the financial statements include the effects of new accounting pronouncements, details regarding earnings per share, receivables, advertising, leases, related-party transactions, income taxes, stock options, contingent liabilities, and much more.

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