The convention of disclosure is an accounting convention that requires companies to provide full and accurate disclosure of their financial position, performance and prospects. This convention is based on the principle that investors are entitled to all information that could reasonably impact their investment decision.
The convention of disclosure ensures that accounting information is transparent and accessible to all stakeholders, so that they can make informed decisions about whether to invest in a company. It also helps to level the playing field between different companies, by ensuring that all have to disclose the same information.
The convention of disclosure is enshrined in accounting standards, which require companies to disclose certain information in their financial statements. This includes information about their assets, liabilities, income and expenses. Companies must also disclose any significant accounting policies that they have used in preparing their financial statements.
The convention of disclosure helps to protect investors from being misled by accounting information. It also helps to ensure that accounting information is useful for making investment decisions.