What is Full Disclosure Principle?
The full disclosure principle is the accounting concept requiring an entity to include in its financial statements all information that is material to users’ economic decisions, whether through the primary statements, notes, or accompanying disclosures.
How It Works
- Material information must be disclosed even if not required by a specific standard.
- Notes cover accounting policies, judgments, estimates, contingencies, and commitments.
- Disclosed items: related-party transactions, subsequent events, segment information.
- Trade-off: comprehensive enough to inform, focused enough to remain useful.
Saudi Context
Saudi listed companies face additional disclosure requirements from the CMA on top of IFRS, including detailed related-party transactions, board remuneration, and material contracts. ZATCA also expects clear disclosure of tax positions and contingencies in the notes to support filed returns.
Example
A Saudi company guarantees SAR 20,000,000 of debt for a subsidiary. While not recorded as a liability, the full disclosure principle requires a note describing the guarantee, beneficiary, amount, and assessed probability of being called.