The full disclosure principle mandates financial reporting of any and all financial actualities, which are significant enough to stimulus the judgment of an informed reader. Complete financial reporting leads to durable capital markets by helping investors and creditors make knowledgeable decisions regarding an organization or business. The intent of financial reporting is to offer an objective look at a company’s financial status. In order for an informed reader to make a knowledgeable decision, there are certain components one must understand. Therefore, the context of this subject will be to outline the disclosure requirements on accounting policies and determine if this information is helpful for decision making. It will also
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The disclosing of accounting policies must incorporate important conclusions as to the relevance of principles concerning the recognition of revenue and allocation of asset costs to current and future periods (FASB, n.d.). Identifying accounting policies answers questions such as the method of depreciation used, valuation method of inventory, and the amortization of intangibles - as accounting standards allow different treatments for the same transaction. Any changes in the accounting policies must also be disclosed if the change is material to the current period or is reasonably expected to have a material effect in a later period. Accounting policies adopted by an organization significantly affects the presentation of its financial position, cash flows, and results of operations. Therefore, clearly outlining accounting policies allow users of these financial statements to compare financial information with other entities within the same industry.
In reviewing Verizon’s 2013 Annual Report, management expressed their depreciation method concerning plant, property, and equipment. As stated in the annual report, Verizon records plant, property, and equipment at cost, depreciating using the straight-line method over the estimated useful life of the asset. By disclosing the depreciation method, users of Verizon’s financial statements are