The full disclosure principle is established as GAAP and states that any and all data and information that is material to financial statements or relevant to investors must be reported. Information is not always financial, such details as management changes, takeovers, lawsuits, and tax disputes are also valuable. Information is presented in the body of financial statements or as attached schedules and notes depending on what type of data it is. There is a balance between information and costs that must be observed to allow reporting to realistically be provided. The Sarbanes-Oxley Act of 2002 (SOX) regulates publicly traded companies with many requirements. Even if information is not required by regulation, the information should be disclosed if relevant, and the cost is not prohibitive.
The full disclosure principle is presented in generally accepted accounting principles (GAAP), which is made up of a set of basic goals and qualities to embody in financial reporting.
The objectives are based on disclosing information that is relevant to creditors and investors for making financial decisions in a timely basis. This allows users to take advantage of the simple fact that the reporting is available and provides tangible benefits. That information is also required to be reliable; data has to be verifiable with another source. It also needs to be both coming from a neutral source, and accurate. This information needs to be internally consistent between separate reporting entities. The final objective requires that reports be consistent in accounting methodology, and explain any changes that do occur. For these reports to be useful they have to come at regular intervals and include information that is relatively standardized. Expenses, revenues, valuation, and specific details that are material to the average investor must all be presented in an effective and preferably industry-standard form.
Disclosure has increased substantially...