1. Who are the users of information, i.e., for whom is the information to be disclosed?
Investors and creditors are the common users of accounting information in all the countries, but other users are employees, customers, society, government etc.
2. How much information should be disclosed?
All possible information relating to an entity cannot be disclosed in financial statements. That would make financial statements unwieldy, large, costly and perhaps more confusing. The information which is material (i.e., which is capable of affecting judgment) to external decision makers, must be disclosed. Hendrickson says that, the “Three concepts of disclosure generally proposed are”:
Adequate: Adequate disclosure means a minimum amount of disclosure so that the financial statements are not misleading.
Fair: Fair disclosure would imply that the accounting and other information is unbiased and impartial. The ethical objective requires that there is equal treatment for all potential readers.
Full disclosure: The presentation of all relevant information.
3. What should be disclosed?
What should be disclosed depends again, upon the basic objectives of financial accounting and reporting. This is also related to the class of users. The following information will be useful to all categories of users in all countries:
• Chairman's report
• CEO's/ Managing Directors report
• Letter to the Shareholders
• Narrative Text, Graphics and Photos, Listing of the company's directors and executive officers
• Summary Financial Data
• Corporate Information
• Auditor's report on corporate governance
• Mission statement
• Corporate governance statement of compliance
• Statement of directors' responsibilities
• Invitation to the company's AGM
As well as financial statements including:
• Auditor's report on the financial statements
• Balance sheet
• Statement of retained earnings
• Income statement
• Cash flow statement
• Notes to the financial statements