ACCA Financial Reporting (F7) Practice Exam 2025 – Complete Prep Guide

When accounting for related party transactions, the principle of full disclosure is crucial to ensure transparency. Related party transactions can often be complex, with the potential for conflicts of interest or influences that may not be apparent from the financial statements alone. Therefore, accurate and comprehensive disclosure is necessary to inform users of the financial statements about the nature of the relationships and the terms of the transactions.

This principle enhances the understanding of the financial statements and allows stakeholders to assess the effects of these transactions on the entity's financial position and performance. Recognizing the need for transparency helps to mitigate the risk of misinterpretation and provides a clearer view of the company's dealings with parties that may have a special connection to the organization.

In contrast, fair value measurement, rounding, and historical cost measurement are important accounting concepts but are not directly related to the specific requirement of disclosing information regarding related party transactions. Therefore, the emphasis on full disclosure highlights the importance of transparency in financial reporting, allowing users to make informed decisions based on a complete understanding of the risks associated with related party transactions.