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 contingencies.
D) requires that the financial statements be consistent and comparable.

Question

Quizplus · Accepted Answer

The full disclosure principle requires a company to disclose all relevant and important information in the financial statements, including contingencies. This allows users to make informed decisions about the company's financial position and future prospects. While complete disclosure may be costly, it is considered necessary for transparency and accountability in financial reporting. B is incorrect because burying important financial information in the notes to the financial statements violates the full disclosure principle. D is incorrect because consistency and comparability are qualities of reliable financial information, but not necessarily tied to the full disclosure principle. A is incorrect because while complete disclosure may be costly, it is still considered a practical and necessary part of financial reporting.

Application of the Full Disclosure Principle