Disclosure Principle: Coca-Cola Company (Essay Sample)

Disclosure Principle: Coca-Cola Company Student's Name University Course Professor Date Disclosure Principle: Coca-Cola Company Disclosure: Importance The full disclosure principle is an accounting concept indicating that all companies should report the relevant information in their monetary statements. The principle applies to material information within the companies' financial statements, which could affect the overall performance. According to Filip et al. (2021), the full disclosure principle assumes that the company investors, other stakeholders, and users of the monetary statements should access the material information to aid in making informed decisions. Companies are required to provide comprehensive information in the footnotes of the financial statements and the supplementary schedules. The material information relates to liability transactions, significant events, and earnings within the period. The full disclosure principle is important in ascertaining transparency of financial reporting. According to Abad et al. (2019), the transparency principle is ideal for establishing meaningful relationships with stakeholders and investors. The provision of material information enables investors to make informed decisions and improve the companies' wellbeing. The full disclosure principle is crucial in providing regulatory compliance. Companies are expected to exercise compliance with accounting principles. For instance, the law requires firms to disclose information on related party interests and transactions. Companies failing to comply with the legal requirements encounter penalties and thus require a significant disclosure mechanism. The other importance of the full disclosure principle is the minimization of fraud and misleading data. Certain companies encounter challenges attributed to misleading financial information. Abad et al. (2019) assert that the full disclosure principle advocates for a declaration of the material information, and thus companies will expose instances of fraud and detect misleading accounting procedures. Disclosure: Rationale The rationale for full disclosure is attributed to fostering transparency. For instance, purchasing a significant asset can affect the company's financial positioning if not disclosed. According to Abad et al. (2019), disclosing the accounting transactions regarding the purchase helps foster transparency among investors, clients, lenders, and company management. Disclosing financial information during the rebranding process is designed to make informed decisions. Investors depend on the company's monetary data to decide whether to invest or withdraw. The company's rebranding can affect its financial position; thus, full disclosure can establish meaningful trust with the investors. Specific Financials: Related-Party Transactions Coca-Cola's codification section on the "disclosure requirements for related-party transactions is Accounting Standards Codification (ASC) 850-10" (Form 10-K, 2020). The section determines related-party transactions as operations between the company and its stakeholders, subsidiaries, affiliates, and associates. The underlying activities require disclosing important information, such as the transaction description. Coca-Cola company must disclose the transactions' details like terms. Information on the type of goods and services involved in the transaction process and their pricing must be disclosed. The company must also disclose the nature of the relationship among the transacting parties. The disclosure must also indicate the transactions' value and procedures used to determine the value. Also, Coca-Cola must disclose information on the transactions' timing, such as the commencement dates. Information on the impact of the transactions on the company's monetary statements must be disclosed. The underlying information will foster transparency under the codification section. Specific Financials: Contingent Liabilities The company's codification section for the contingent liabilities' disclosure requirements is ASC 450-20, loss contingencies (Form 10-K, 2020). The section indicates contingent liabilities as forecasted losses emanating from the company's current events, conditions, and operations. Information on the nature of contingency is required for contingent liability transactions. For instance, Coca-Cola must disclose information on the main transactions, events, and circumstances which led to a loss. The company could have opted for a strategic transformation of the distribution chain but encountered a significant loss. Information on the approximation of the loss must be disclosed. The potential loss can be evaluated, and the company provides a value that would affect the financial statements. Information on the likelihood of occurrence and the impact on the monetary statements must be disclosed. This disclosure helps the investors make informed decisions on investing further in the company. Specific Financials: Subsequent Events The codification section for subsequent events disclosure requirements is ASC 855-10 (Form 10-K, 2020). The section portrays subsequent events as occurrences after the "balance sheet date" but before the issuance of the monetary statements. The disclosure requirement for subsequent events helps ascertain transparency of the financial statements as they avail updated data. Coca-Cola's information on subsequent events that need full disclosure pertains to litigation. Once the company engages in legal disputes after the fiscal date, the data should be disclosed in the monetary statements. The underlying disclosure should include a description of the type of litigation and the probable effect of the organization's monetary position. The disclosure should also contain information on the acquisitions and disposals made after the balance sheet date. The disclosure should incorporate the effect of the acquisitions and disposals on the company's financial statements. The disclosure also incorporates information on the tax laws changes. Shifts in the tax laws cause a significant impact on Coca-Cola's monetary position and should be disclosed. Specific Financials: Major Business Segments Coca-Cola's codification section for major business segments' disclosure requirements is ASC 280 (Form 10-K, 2020). The codification segment determines the disclosure of major business segments as important in providing information to investors and shareholders. The type of information required to be disclosed in the major business segments pertains to revenue. Revenue obtained from each major business segment requires a separate disclosure. The disclosure will help investors determine the contribution measures and the company's turnover. Secondly, information on profit and loss within each major business segment should be disclosed separately. The information will help determine the profitability status of Coca-Cola. Information on the assets and liabilities should be disclosed, and the company's investment status should be ascertained. The information on inter-segment operations should be disclosed and determine the nature of the transactions. The underlying information will help investors understand the connection between Coca-Cola and the potential effect of the monetary statements. Specific Financials: Interim Reporting The codification section for Coca-Cola's interim reporting disclosure is ASC 270 (Form 10-K, 2020). The codification section describes interim reporting as the monetary statements prepared for less than one fiscal year. Information on condensed monetary statements should be disclosed to include the values of the balance sheet, cash flow statements, and income statements. The statements should be reported in a comprehensive format summarizing Coca-Cola's performance. Disclosure on the accounting policy change should be disclosed to detail the underlying effects. Information on segment data should be disclosed for an interim period. The underlying information comprises the values of profits, losses, and revenues. Coca-Cola should disclose information on contingencies occurring within the interim period. The information includes environmental liabilities, litigation, and other ...