Full Disclosure Principle in Accounting

According to the principle of full disclosure, the financial statements shall disclose all material facts either on the face of it or within the notes to accounts. The full disclosure principle is of great relevance to the materiality concept. Even though the provisions of the Companies Act, 1956 has made many disclosures mandatory for the businesses but still there are several ways in which the businesses can make better disclosure.

Examples

A business shall disclose all its accounting policies so as to assist the users of financial statements to better understand the financial reports.

Contingent liabilities, contingent assets, and other legal obligations, etc. must be disclosed within the financial statements in order that it helps the users to form an informed choice.

Events that have occurred after the preparation of financial statements but before the issue of financial statements are to be disclosed in the financial statements.

ABC Ltd sold one of its subsidiaries G Ltd to Mrs. A (director Mr. A’s wife), then such information should be disclosed within the financial statements.


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