Full Disclosure Essay

be is an education system that identifies, records, and communicates the economic correctts of an system to interested users (Kieso, Weygandt, and Warfield, 2007). Information that is relevant and great to users should be collapsed unfortunately, some data can non be quantified through fiscal data. true data can non be included in the organizations pecuniary statements. The estimable divine revelation principle explains how companies handle situations that can non be explained in numerical terms exclusively should be transgressd to the investing existence. This physical composition lead explain what is the expert divine revelation principle in news report and why has manifestation change magnitude advantageously in the last 10 years. This paper will alike address why full disclosure is infallible and what workable consequences whitethorn occur if companies do non occur these principles.What is proficient apocalypse?The full disclosure principle c every la st(predicate)s for financial inform of each financial facts significant enough to find out the judgment of an informed reader (Kieso, Weygandt, and Warfield, 2007, p. 1282). For example, accepted financial culture does not forthwith captivate specific journal accounts. However, these financial events whitethorn influence the future of the societys or whitethorn influence how investors view the financial stability of the company. For example, a noble-profile ongoing lawsuit whitethorn practice dramatic constraints on the companys liabilities and assets if the company must pay last litigation fees and settlements.This type of information has a huge impact on how stable the company seems. Unfortunately, it will not be stated in the financial statements since the effort has not been colonized. According to the full disclosure principle, the company should disclose this type of information in the notes of the financial statements. This kind of information influences how inv estors rate the companys financial stability and strategic future even though the company has not settlight-emitting diode the case yet. Full disclosure in like manner curbs fraudulent write up acts that can be hidden or omitted from financial statements. wherefore Full Disclosure Increased good in the Last 10 geezerhood?The full disclosure principle has substanti completelyy increased within the last 10 years due to several reasons. 1 of the reasons is due to the wake of off-balance sheet financing made public by the Enron crap (Kieso, Weygandt, and Warfield, 2007). Fraudulent accounting acts made known by the Enron scandal has prompted the industry to pay back this principle. Consequently, the SEC called for an expanded disclosure in order to underwrite that companies be disclosing all undeniable information.By disclosing information that may affect users, companies comply with the increased inform requirements recently made by the accounting profession. It also fo rces companies to disclose information that has the authority of having huge financial consequences to the art. Moreover, the complexity of the business environment, and the ingest for timely information has increased the need for full disclosure as well. As a result, the SEC obligate the full disclosure principle more than fully to help monitor and go out business organizations (Kieso, Weygandt, and Warfield, 2007).Why is Full Disclosure Needed?The Securities Exchange Commission (SEC) and the public have both called for the need to disclose accurate financial information that states all contractual obligations and liabilities must be reported. In other words, full disclosure is needed to ensure that organizations are disclosing all of the necessary information to help investors, creditors, and the public ingest better and wiser decisions regarding their companies. Full disclosure is also needed to ensure that companies do not commit fraudulent activities like the activities that were committed within the Enron organization. Full disclosure also helps investors determine if a company is as stable as the financial statements step forward to be.Possible ConsequencesFailing to disclose items in financial statements can have several possible consequences. The Enron scandal shows how company executives can be held liable for fraudulent activity. Criminal and courteous liabilities may occur if executives fail to disclose financial information that may mislead investors. Another consequence is losing public devote if an organization is caught not disclosing pertinent information. A company may lose high public opinion if shareholders are led to believe that the company was more economic than what was actually occurring. Moreover, a company may not be able to rule from bad press, litigation costs, and government fines if caught not fully disclosing financial information.The Sarbanes Oxley Act reinforces the consequences and punishments of not fully d isclosing financial information. The main close of this act focuses on deterring fraudulent acts and newspaper clipping down on poor reporting practices. chief executive officers and CFOs are held personally liable for the true statement of financial statements a forfeit of the CEOs bonuses or company scratch may be withheld if accounting restatements are made as well (Kieso, Weygandt, and Warfield, 2007). freelance auditors must be employed to ensure that accurate information is disclosed as well.ConclusionThe full disclosure principle ensures that relevant and useful financial information is reported accurately to the public. Fraudulent accounting activity has called for fixeder interpretations of this principle since criminal, civil, and SEC violations may occur if full disclosure is not followed. The Sarbanes Oxley Act highlights the consequences of not fully disclosing information. These strict guidelines show how the government has responded to accounting activities tha t get down to hide certain financial activities. score managers must be aware of the heightened need for fully disclosing all types of financial events or information that may affect the investors view of the financial stability of a company.ReferencesWeygandt J., Kieso D., & Kimmel, P. (2007) Financial report and Accounting Standards. Intermediate Accounting (12th edition).Kieso D., Weygandt J., & Warfield T. (2007). Full Disclosure. Intermediate Accounting (12th edition).