Does judgment influence financial statement disclosures?

Answer 1

Judgement is applied all the time, e.g. in the choice of accounting policies (straight-line or declining method?), a/cg estimates (3yr useful life or 4 yrs?), shd we make an allowance for this debt or not? etc, and in the making of disclosures of information that is not already recorded in the financial statements, for e.g. fair value of an asset that's recorded at cost, existence of a pending lawsuit which is not provided for,etc. The amt of info you release to the readers is very much a matter of judgement.

Answer 2

In most cases it does. The purpose of preparing financial statements is to inform an outside third party about the financial status of a company. While preparing those financial statements, you are required to follow general accepted accounting principals (GAAP). However, GAAP does allow you to consider materiality of items when preparing the statements. Judgement lies in determining what items are material and what items might be important to the users of the statements.

Answer 3

Judgement affects the results in financial statements... but anywhere that judgement is applied (valuing assets, goodwill, etc.) there are supposed to be clear notes that explain that "judgement" or "estimates" were applied.

They don't, however, have to explain the thinking behind the estimates made.