Walden Industries is being sued by a former employee for wrongful termination. It is probable that the company will lose the case and be ordered to pay the plaintiff a significant sum of money. If Walden fails to report this information somewhere in its financial statements, it is violating the GAAP concept of:
A) Materiality
B) Full disclosure
C) Matching
D) Cost-benefit

Question

Quizplus · Accepted Answer

According to the GAAP concept of full disclosure, all material information that could affect the financial statements must be disclosed. The outcome of a significant legal case qualifies as material information and must be disclosed. If Walden fails to report this information, it would violate the full disclosure concept.

Walden Industries Is Being Sued by a Former Employee for Wrongful