The principle of representational faithfulness requires that companies:
A)disclose their financial positions and operational results.
B)when in doubt,disclose a contingent liability.
C)ignore contingent liabilities.
D)A and B.

Question

Quizplus · Accepted Answer

The principle of representational faithfulness requires companies to disclose their financial positions and operational results accurately and truthfully. Additionally, it requires them to disclose contingent liabilities when there is uncertainty about their likelihood or potential impact on the company's financial performance. Therefore, options A and B are correct. Option C, ignoring contingent liabilities, would violate the principle of representational faithfulness.

The Principle of Representational Faithfulness Requires That Companies