Question

when accounting practices are
. 16. Explain any three of the following accounting conventions:
(i) Full Disclosure,
(ii) Consistency,
(iii) Materiality and
(iv) Conservatism.
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Answer 1

Answer:

1. Full disclosure is the U.S. Securities and Exchange Commission's (SEC) requirement that publicly traded companies release and provide for the free exchange of all material facts that are relevant to their ongoing business operations.
2. Consistency refers to a company's use of accounting principles over time. When accounting principles allow a choice between multiple methods, a company should apply the same accounting method over time or disclose its change in accounting method in the footnotes to the financial statements.
3. Materiality is an accounting principle which states that all items that are reasonably likely to impact investors' decision-making must be recorded or reported in detail in a business's financial statements using GAAP standards.
4. Accounting conservatism is a principle that requires company accounts to be prepared with caution and high degrees of verification. All probable losses are recorded when they are discovered, while gains can only be registered when they are fully realized.