Application of the full disclosure principle
A)is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits.
B)is violated when important financial information is buried in the notes to the financial statements.
C)is demonstrated by the inclusion of information such as information about contingencies.
D)requires that the financial statements be consistent and comparable.

Question

Quizplus · Accepted Answer

The full disclosure principle requires that all material financial information be included in the financial statements or accompanying notes. Information about contingencies, such as pending lawsuits or environmental risks, is an example of information that should be disclosed to allow users to make informed decisions. A and B are incorrect, as the full disclosure principle is both theoretically desirable and practical, and burying important financial information violates the principle. D is incorrect, as consistency and comparability are principles related to the presentation of financial statements, not the full disclosure principle.

Application of the Full Disclosure Principle