Current market prices Essay Example

The matching principle states that expenses and revenues must be matched whenever possible. Expenses only receive recognition when associated products or services create revenue. In case there is no correlation between an expense and revenue, the expenses can be charged in the ongoing period. The principle emphasizes accuracy and robustness while evaluating actual performance and profitability by showing how much was spent to earn a given revenue. The disclosure principle governs the amount of information that can be disclosed.

Based on this principle, the level of information disclosed should be determined through a trade-off analysis. Excessive information can lead to higher costs in financial record preparation and use. Therefore, information presented should be sufficient for making judgments while ensuring lower costs. Financial data can be included in the main statement, notes, or supplementary materials. Constraints are imposed to minimize errors and guarantee reliability in financial reporting.

The financial records should be based on objective evidence according to the objectivity principle (Ricardo ; Kolthammer 54). Reporting an item is the only way to consider its significance. Information is considered significant under the materiality principle if it can affect decisions made by a reasonable person (Ricardo ; Kolthammer 55). Additionally, companies must ensure consistency in their accounting principles year after year.

According to Ricardo ; Kolthammer (55), the wise choice is to prioritize the solution that is expected to underestimate the income and assets when faced with two options.