An example of the full disclosure principle would be a firm signing a major contract in November to construct custom machinery for a client. Work in the current year is nil, yet the notes to the firm's financial statements discuss the nature and dollar amount of the contract.

Question

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The full disclosure principle requires that relevant information be disclosed in the financial statements or accompanying notes, even if it doesn't currently impact the financial statements. In this example, the notes to the financial statements provide information about a major contract that was signed but has not yet begun to impact the financial statements. This information is relevant to investors and should be disclosed.

An Example of the Full Disclosure Principle Would Be a Firm