The full disclosure principle:
A)Requires that when a change in inventory valuation method is made,the notes to the financial statements report the type of change,why it was made,and its effect on net income.
B)Requires that companies use the same accounting method for inventory valuation period after period.
C)Is not subject to the materiality principle.
D)Is only applied to retailers.
E)Is also called the consistency principle.

Question

Quizplus · Accepted Answer

The full disclosure principle requires companies to provide all necessary information in their financial statements for users to make informed decisions. This includes disclosing any changes in accounting methods, such as inventory valuation, and explaining the reason for the change and its impact on net income. Option B is actually the consistency principle, which requires companies to use the same accounting method for inventory valuation period after period. Option C is incorrect as the full disclosure principle applies to all material information, which means that immaterial information does not need to be disclosed. Option D is incorrect as the full disclosure principle applies to all companies, not just retailers.

The Full Disclosure Principle