When disclosure is required by GAAP about a situation, what must be included?

When disclosure is required by GAAP (Generally Accepted Accounting Principles) regarding a particular situation, it is necessary to provide either an affirmative or negative statement to ensure clarity and transparency in financial reporting. An affirmative statement explains what is happening or what is affirmed about a situation, while a negative statement addresses circumstances that do not exist or are not applicable.

This dual approach is critical because it allows users of financial statements—such as investors, creditors, and regulators—to fully understand the implications of the situation being disclosed. Transparency is a key principle under GAAP, and providing both types of statements helps prevent misunderstandings and misinterpretations that could arise from vague or incomplete information. This requirement reflects GAAP's emphasis on providing a fair representation of a company's financial position and performance, aligning disclosures with the principles of consistency, relevance, and reliability.

In contrast, focusing solely on a detailed explanation, only positive statements, or the absence of any statements fails to meet the comprehensive disclosure needs outlined by GAAP, which could potentially mislead stakeholders.