Concept of Full Disclosure

The purpose of financial accounting is to provide information to the users for decision-making. The full disclosure concept implies that all material information that could affect the decision of the user must be disclosed. Businesses today are managed by managers and  not the owners of the company. Hence, the Companies Act makes adequate provisions for disclosure of essential and adequate information in the company accounts. The format of balance sheet and the profit and loss account prescribed under the Companies Act itself justifies the concept of full disclosure. Entries such as contingent liabilities and market value of investments appearing in as notes further reiterate the principle of full disclosure. It ensures complete, fair and adequate disclosure of business transactions in financial reports. Because of wide recognition of this principle, Accounting Standards have been evolved, which deal with the disclosure requirements on significant accounting policies. AS-1 of the Institute of Chartered Accountants of India deals with the disclosure of Accounting Policies.