A firm signs a major contract in December to construct custom machinery for a client. No work is begun the current year, yet the notes to the firm's financial statements discuss the nature and dollar amount of the contract. This is an example of
A) Reliability
B) Full disclosure
C) Historical cost
D) Conservatism
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

This is an example of full disclosure, as the firm's financial statements discuss the nature and dollar amount of the contract even though no work has yet begun. Full disclosure requires companies to present all material information that could impact a reader's understanding of the financial statements.

A Firm Signs a Major Contract in December to Construct