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CHAPTER 3 Financial Disclosures

CHAPTER 3 Financial Disclosures - The Balance Sheet and...

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The Balance Sheet and Financial Disclosures FINANCIAL DISCLOSURES DISCLOSURE NOTES The full-disclosure principle requires that all relevant information be contained in the financial statements or the disclosure notes. Some of the more frequent disclosure notes are as follows: Summary of Significant Accounting Policies The application of GAAP requires choosing between alternative accounting methods. The first disclosure note normally contains a summary of all the choices made by management with respect to the application of GAAP. The summary of significant accounting policies might contain the following: 9 Cash Equivalents -defines the policy of accounting for short-term investments that can be converted into cash on short notice 9 Inventories -defines the application of cost flow assumptions and normally states that inventories are valued at the lower of cost or market 9 Depreciation -defines the service life and depreciation methods applied to different
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