Disclosures in financial statement continue to be the most important issues facing companies and the accountants. SFAS No. 5 outlines various methods of disclosures that corporations should use in financial statements. These various methods include all the information useful for investment, credit and similar decisions, financial reporting, the areas directly affected by existing FASB standards, basic financial statements and finally the scope of recognition and measurement concepts statements. Below is a discussion of the various methods.
The first disclosure method involves including all the information useful for investment, credit and similar decisions an investor or reader of the financial statement may make. This section of disclosure is very broad. In this context, the information can be from an independent firm such as an analysts or newspaper write to the company’s opinion. In the case of the company they would issues such information as economic statistics and possible discussion of competition and order backlog in SEC From 10-K.
The second disclosure method involves the other means of financial reporting. These other means of reporting would include management’s discussion and analysis (MD&A) and possible letter to the stockholders. The MD&A is required by the SEC of all publicly traded companies in their annual reports. SFAS No. 1 states the reasons for this requirement. The main purpose of the letter to stockholders indicates that management, is responsible for preparation and integrity of statements, has prepared statements in accordance with GAAP, has used their best estimates and judgement, and finally maintains a system of internal controls.
The third disclosure method involves the areas directly affected by existing FASB standards. The ...