Management has an obligation to disclose all events and transactions in the financial statements that are likely to have a material effect on the entity's financial position.

• A. False
• B. True
• C. Not specified
• D. Only those affecting cash

Answer: (B)

Materiality guides what must be disclosed in financial statements. Management is expected to disclose all events and transactions that would likely affect a reader’s assessment of the entity’s financial position, typically in the notes or as part of the reporting. This includes significant events after the reporting period that provide new information about conditions at year-end or affect going concern, and it covers non-cash items as well as cash ones. Therefore, the statement is true; it’s not only about cash events, and immaterial items need not be disclosed.