Full Disclosure - 1 Full Disclosure The purpose of...

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1 Full Disclosure The purpose of financial reporting is to ensure that the stakeholders in the business are aware of the condition in which the business is in and can make informed decisions. The condition of the business is best projected through financial statements like the balance sheet, profit and loss statement, and the cash flow statement. The purpose of these statements is to show the condition of the business through financial data. As only the management is aware of the day-to-day business activities, the other stakeholders like the stockholders, business partners, customers, and potential investors need to know how well the management is handling the company. The FASB sets guidelines about what has to be shown by the company management in its financial reporting. The full disclosure principle states that company should include in an entity's financial statement all information that would affect a reader's understanding of those statements. Although financial statements are mostly number based, some aspects cannot be expressed through numbers. Therefore, full disclosure means that any facts that are relevant and significant to the prosperities of the business have to be mentioned in the report. For example, if
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This note was uploaded on 04/04/2012 for the course ACC 422 taught by Professor Susan during the Spring '08 term at University of Phoenix.

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Full Disclosure - 1 Full Disclosure The purpose of...

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