A severe cold snap may affect this year's crop of Florida's citrus growers.The potentially adverse affect is disclosed in the financial statements of the citrus growers.This practice can be best described as an application of
A)The derecognition of financial statement elements
B)The full disclosure principle
C)The going concern assumption
D)The economic entity assumption

Question

Quizplus · Accepted Answer

The practice of disclosing potential risks and uncertainties that may affect the financial statements is an application of the full disclosure principle in accounting. This principle requires companies to provide all relevant and material information in their financial statements to help users make informed decisions. Therefore, disclosing the potential adverse affect of the cold snap on the crop is a form of compliance with the full disclosure principle.

A Severe Cold Snap May Affect This Year's Crop of Florida's