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Horngren'S Financial And Managerial Accounting
Found in: Page 357

Short Answer

What does the disclosure principle require?

The disclosure principle requires disclosing the information regarding the procedure and methods adopted to prepare financial statements.

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Step by Step Solution

Disclosure principle

The disclosure principle is the governing rule for making financial statements. All the accounting standards are based on some principles. The accounting standards relating to inventories also require the disclosure principle to make informed decisions.

Requirement of disclosure principle

The disclosure principle is based on the requirement of making the useful and required information public to outsiders. Sometimes looking at the financial figures alone is not helpful in making the right decision. It is also equally important to get to know the methods and procedures adopted to reach that financial figure.

The disclosure principle fulfills this requirement by making it compulsory to disclose the required and enough information for making knowledgeable decisions

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