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12. Full Disclosure Disclosure is an accounting principle that requires full adequate) disclosure of all material (significant) matters affecting the financial statements that would be of interest to the users of accounting information. The full disclosure principle specifies that there should be complete and understandable reporting on the financial statements of all significant information relating to the economic affairs of the entity. Full disclosure requires that financial statements be designed and prepared to portray accurately the economic events that have affected the firm for the period and to contain information sufficient to make them useful, and not misleading to the users. Full disclosure is required when alternative policies are available (FIFO, LIFO), principles peculiar to particular industry and unusual or innovative application of accounting principles.. While preparing financial statements, it should be ensured that significant facts or information are not omitted. It would increase the relevance and reliability of financial statements. 13. Substance over Form 96 Substance over form is an accounting concept whereby transactions and other events are accounted for and presented in accordance with their economic reality rather than their legal form. In accounting, substance should normally take precedence over form in deciding how a particular transaction should be recorded. The legal form of a transaction is frequently descriptive of its economic substance. However, the form occasionally misrepresents the characteristics that are relevant to users. If the substance can be reliably determined, the accountant should describe the transaction in terms of the substance rather than the form. Accounting for hire-purchase transactions, for example, is based on the above concept, i.e., it looks at the substance of the transaction rather than its legal form. The hire-purchaser can record the asset at its cash down price, while paying for it by instalments over an agreed period of time. Illustration 1 In preparing the accounts of your company, you are faced with a number of problems. These are summarised below: (a) The managing director wishes the company's good industrial relations to be reflected in the accounts. (b) The long-term future success of the company is extremely uncertain. (c) Although the sales have not yet actually taken place, some reliable customers of the company have placed several large orders that are likely to be extremely profitable. (d) One of the owners of the company has invested his drawings in some stocks and shares. At the year end, an amount is outstanding for electricity that has been consumed during the accounting period. (1) Fixed assets would now cost a great deal more than they did when they were originally purchased. (8) During the year, the company purchased ? 100 worth of pencils; these had all been issued from stock and were still in use at the end of the year. (h) The company has had a poor trading year, and the owners believe that a more balanced result could be presented if a weighted average stock valuation method was adopted, instead of present FIFO method. (i) A debtor who owes a large amount to the company is rumoured to be going into liquidation. 6) The company owns some shares in a quoted company which the accountant thinks are worthless. You are required to: (i) state which accounting concept the accountant should follow in dealing with each of the above problems; (ii) explain briefly what each concept means

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