Chapter 23

Other Measurement and Disclosure Issues


Often, more detail relating to amounts shown in the financial statements is provided in the notes to the financial statements and/or other supplementary disclosures, in order to provide users with more useful information. Disclosure issues involving accounting policies, illegal acts, segmented reporting, and interim reporting are discussed in this chapter. Other measurement issues, including related-party transactions and subsequent events, are also discussed in this chapter. An overview of financial statement analysis techniques, including ratio analysis and percentage (common-size) analysis, is also provided in this chapter, with an emphasis on examining the relationships between items on the financial statements and identifying trends in these relationships.


Understanding the Importance of Disclosures

The full disclosure principle requires that any financial facts that are significant enough to influence the judgement of an informed reader should be reported. This is a very broad guideline, and therefore professional judgement is required in applying it. More disclosure is generally better than less disclosure; for example, if the financial statements contain unexpected results or events, more disclosure of the related transactions is preferred. However, the full disclosure principle does provide that if a financial fact is not significant enough to influence the judgement of an informed reader, it need ...

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