UK Accounting Glossary
the action of making new or secret information known.
Disclosure is the release of relevant information. Disclosure requirements play a major role in Generally Accepted Accounting Principles (GAAP), which dictate whether and where disclosure must be made on financial statements of business events. In investing, disclosure is commonly used in the term “full disclosure,” the requirement to release all information pertaining to a security or business transaction. A series of laws, beginning with the Securities Act of 1933 and continuing through the passage of Sarbanes-Oxley, has expanded full disclosure requirements for publicly traded companies, mutual funds, securities brokers, and others to a growing list of activities, including initial public offerings, proxy solicitations, and tender offers. The goal of full disclosure is to ensure transparency so all investors who participate in markets operate on a level playing field. Company management and boards of directors have strong incentives to seek full disclosure in public offerings. First, full disclosure of any potential problems tends to limit their legal liability should problems arise. Second, investors tend to discount the value of securities whose business they can’t understand or who they believe are hiding material information.
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This glossary post was last updated: 15th January 2020.