Full Disclosure Principle Cost

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Full Disclosure Principle
Cost-Benefit Constraint
By: Ashfi, Chris, Al-Miraz
Full Disclosure Principle
Definition
 It is the principle which defines that all information that
affects any individual who uses the financial statement needs
to be divulged to the users.
 It is represented by two things in the statement, the data
contained and accompanying notes
What needs to be shown
 The information that must be shown is the method that was
used by a company for inventory, amortization of capital
assets, ect.
 Information that is divulged are part of three categories, they
are, proved supplementary detail, explain unrecorded
transactions, supply new information
An example
 Al-miraz’s company The Elmo a company that sells toys
divulges that the company has chosen the LIFO method of
inventory costing and straight line method for amortizing
capital assets
Cost-Benefit Constraint Definition
 The value of whatever information is more then the cost of
disclosing it.
 Accountants can disclose every financial event that occurs
but this additional information increases cost and the benefits
may be less then the cost.
Example
Take Al-Miraz company The Elmo, is counting the amount of
toys it has. Does the cost of counting the toys worth the
benefit of counting them? Yes as it gives the company an
idea of how much it can sell so the benefit outweighs the
cost, so benefits are usually stuff that results in more money
not less.
Quiz Questions
 1. What are three categories of information that needs to be
disclosed (Full Disclosure Principal)
 2. Is the benefit of counting the amount of ice cubes worth
the cost of counting it. Why or why not.
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