The Full Disclosure Principle

question 91

Multiple Choice

The full disclosure principle:

• A)Requires that when a change in inventory valuation method is made,the notes to the financial statements report the type of change,why it was made,and its effect on net income.
• B)Requires that companies use the same accounting method for inventory valuation period after period.
• C)Is not subject to the materiality principle.
• D)Is only applied to retailers.
• E)Is also called the consistency principle.

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Definitions:

Operating Income

Earnings from a company's core business operations, excluding deductions of interest and taxes.

Initial Value Method

An accounting method that records an investment at its original cost without adjusting for changes in market value or the investee's earnings, except to recognize impairments.

Intra-entity Transfers

Transactions occurring between divisions or units within the same company.

Income Taxes

Taxes levied by governments on the income generated by individuals and businesses within their jurisdiction.