Reliability of information contained in the financial statements is achieved only if complete financial information is provided relevant to the business and financial decision making needs of the users. Therefore, information must be complete in all material respects.

Incomplete information reduces not only the relevance of the financial statements, it also decreases its reliability since users will be basing their decisions on information which only presents a partial view of the affairs of the entity.

Test Your Understanding

Under which of the following circumstances will the completeness of information contained in financial statements be compromised?

Contingent liability in respect of a claim against the company has not been disclosed by the management because it believes that the likelihood of an adverse court decision is low.

Company with an annual turnover of $10 billion does not present income from sale of fixed assets of $10,000 separately in the income statement

Company does not disclose sales made to a subsidiary (related party) as the management believes the transactions had been made on an arm's length basis (i.e. at market prices)