What does the Full Disclosure Principle require a business to do?

The Full Disclosure Principle mandates that a business must disclose all significant information that could impact the decision-making of lenders and investors. This principle is founded on the notion that transparency is essential for stakeholders who rely on financial statements to assess the financial health and risks associated with a business.

By ensuring that all relevant information, including risks, uncertainties, and other financial data, is presented, the principle fosters informed decision-making. This might include notes on accounting policies, contingent liabilities, or subsequent events that have occurred after the balance sheet date but before the statements are issued. Such full disclosure helps to prevent any misleading impressions about the financial condition of the business and supports a fair evaluation from external parties.