{"id":87,"date":"2024-09-06T16:46:19","date_gmt":"2024-09-06T16:46:19","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/full-disclosure\/"},"modified":"2024-09-18T21:12:12","modified_gmt":"2024-09-18T21:12:12","slug":"full-disclosure","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/full-disclosure\/","title":{"raw":"Full Disclosure","rendered":"Full Disclosure"},"content":{"raw":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\r\n<ul>\r\n \t<li>Describe the full disclosure principle<\/li>\r\n<\/ul>\r\n<\/section>&nbsp;\r\n\r\nAs one of the principles in GAAP, the full disclosure principle definition requires that all situations, circumstances, and events that are relevant to financial statement users have to be disclosed. In other words, all of a company\u2019s financial records and transactions have to be available for viewing.\r\n\r\nFinancial statements normally provide information about a company's past performance. However, pending lawsuits, incomplete transactions, or other conditions may have imminent and significant effects on the company's financial status. The full disclosure principle requires that financial statements include disclosure of such information. Accordingly, financial statements use footnotes to convey this information and to describe any policies the company uses to record and report business transactions.\r\n\r\n&nbsp;\r\n\r\n<section class=\"textbox example\" aria-label=\"Example\">\r\n<h3>General Electric's 2019 Annual Report<\/h3>\r\nFor instance, the following footnotes are excerpts from the General Electric annual report (including the Form 10-K to the SEC) for the year ended December 31, 2019:\r\n<p style=\"padding-left: 30px;\">NOTE 13. POSTRETIREMENT BENEFIT PLANS\r\nPENSION BENEFITS AND RETIREE HEALTH AND LIFE BENEFITS.\r\nWe sponsor a number of pension and retiree health and life insurance benefit plans that we present in three categories, principal pension plans, other pension plans and principal retiree benefit plans. Smaller pension plans with pension assets or obligations less than $50 million and other retiree benefit plans are not presented. https:\/\/www.ge.com\/investor-relations\/sites\/default\/files\/GE_AR19_AnnualReport.pdf, page 89<\/p>\r\n<p style=\"padding-left: 30px;\">NOTE 23. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES\r\nSEC investigation. In late November 2017, staff of the Boston office of the U.S. Securities &amp; Exchange Commission (SEC) notified us that they are conducting an investigation of GE\u2019s revenue recognition practices. We are providing documents and other information requested by the SEC staff, and we are cooperating with the ongoing investigation. Staff from the DOJ are also investigating these matters, and we are providing them with requested documents and information as well.[footnote]https:\/\/www.ge.com\/investor-relations\/sites\/default\/files\/GE_AR19_AnnualReport.pdf, page 108[\/footnote]<\/p>\r\n\r\n<\/section>The SEC has the right to penalize violations of the full disclosure rule. For example, in June 2002, an audit of WorldCom revealed that it had overstated its assets by over $11 billion. The SEC fined WorldCom $750 million, the largest penalty assessed to that date. Even so, investors lost over $2 billion due to the stock devaluation that followed the financial fraud.\r\n\r\n<section class=\"textbox tryIt\" aria-label=\"Try It\">[ohm2_question hide_question_numbers=1]25112[\/ohm2_question]<\/section>","rendered":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\n<ul>\n<li>Describe the full disclosure principle<\/li>\n<\/ul>\n<\/section>\n<p>&nbsp;<\/p>\n<p>As one of the principles in GAAP, the full disclosure principle definition requires that all situations, circumstances, and events that are relevant to financial statement users have to be disclosed. In other words, all of a company\u2019s financial records and transactions have to be available for viewing.<\/p>\n<p>Financial statements normally provide information about a company&#8217;s past performance. However, pending lawsuits, incomplete transactions, or other conditions may have imminent and significant effects on the company&#8217;s financial status. The full disclosure principle requires that financial statements include disclosure of such information. Accordingly, financial statements use footnotes to convey this information and to describe any policies the company uses to record and report business transactions.<\/p>\n<p>&nbsp;<\/p>\n<section class=\"textbox example\" aria-label=\"Example\">\n<h3>General Electric&#8217;s 2019 Annual Report<\/h3>\n<p>For instance, the following footnotes are excerpts from the General Electric annual report (including the Form 10-K to the SEC) for the year ended December 31, 2019:<\/p>\n<p style=\"padding-left: 30px;\">NOTE 13. POSTRETIREMENT BENEFIT PLANS<br \/>\nPENSION BENEFITS AND RETIREE HEALTH AND LIFE BENEFITS.<br \/>\nWe sponsor a number of pension and retiree health and life insurance benefit plans that we present in three categories, principal pension plans, other pension plans and principal retiree benefit plans. Smaller pension plans with pension assets or obligations less than $50 million and other retiree benefit plans are not presented. https:\/\/www.ge.com\/investor-relations\/sites\/default\/files\/GE_AR19_AnnualReport.pdf, page 89<\/p>\n<p style=\"padding-left: 30px;\">NOTE 23. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES<br \/>\nSEC investigation. In late November 2017, staff of the Boston office of the U.S. Securities &amp; Exchange Commission (SEC) notified us that they are conducting an investigation of GE\u2019s revenue recognition practices. We are providing documents and other information requested by the SEC staff, and we are cooperating with the ongoing investigation. Staff from the DOJ are also investigating these matters, and we are providing them with requested documents and information as well.<a class=\"footnote\" title=\"https:\/\/www.ge.com\/investor-relations\/sites\/default\/files\/GE_AR19_AnnualReport.pdf, page 108\" id=\"return-footnote-87-1\" href=\"#footnote-87-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/p>\n<\/section>\n<p>The SEC has the right to penalize violations of the full disclosure rule. For example, in June 2002, an audit of WorldCom revealed that it had overstated its assets by over $11 billion. The SEC fined WorldCom $750 million, the largest penalty assessed to that date. Even so, investors lost over $2 billion due to the stock devaluation that followed the financial fraud.<\/p>\n<section class=\"textbox tryIt\" aria-label=\"Try It\"><iframe loading=\"lazy\" id=\"ohm25112\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=25112&theme=lumen&iframe_resize_id=ohm25112&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n<hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-87-1\">https:\/\/www.ge.com\/investor-relations\/sites\/default\/files\/GE_AR19_AnnualReport.pdf, page 108 <a href=\"#return-footnote-87-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":6,"menu_order":8,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Full Disclosure\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":79,"module-header":"- Select Header -","content_attributions":[{"type":"original","description":"Full Disclosure","author":"Joseph Cooke","organization":"Lumen Learning","url":"","project":"","license":"cc-by","license_terms":""}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/users\/6"}],"version-history":[{"count":6,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87\/revisions"}],"predecessor-version":[{"id":1111,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87\/revisions\/1111"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/parts\/79"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/media?parent=87"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=87"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/contributor?post=87"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/license?post=87"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}