Disclosure of Related Parties Is Essential in Financial Reporting Because

question 26

Multiple Choice

Disclosure of related parties is essential in financial reporting because:

• A) related parties cannot be trusted;
• B) there are certain limits imposed on entities in regards to how many related party transactions they could have;
• C) related parties have the potential to affect an entity's profit or loss and financial position that might not otherwise occur;
• D) a high number of corporate collapses are caused by related party transactions.

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Definitions:

UCC

The Uniform Commercial Code, a set of laws that govern commercial transactions in the United States.

Simple Delivery Contract

An agreement where goods are transferred directly from the seller to the buyer without any special conditions or requirements.

Comprehensive Sales Contract

A legal document that outlines the complete terms of a sale, including details of the transaction, responsibilities of the buyer and seller, and procedures for resolving disputes.

Good-faith Purchaser

A good-faith purchaser is an individual or entity that buys property without knowledge of any existing claims or defects against it, thereby gaining legal protection.