Network structures as a factor in violation of the principle of completeness of financial reporting

Abstract

Introduction. The principle of full disclosure is fundamental to ensuring the reliability and usefulness of financial reporting. Its essence is that financial information should reflect all facts, events, and potential consequences of economic activity that can affect users’ decision-making. In the Conceptual Framework of IFRS, completeness is considered a qualitative characteristic of a reliable presentation: information should be complete, neutral, and error-free. In Ukrainian legislation, the principle is enshrined in the Law “On Accounting and Financial Reporting in Ukraine”, which emphasizes the need to include both actual and potential consequences of economic transactions in the reporting. In the context of network structures, opportunities arise for concealing liabilities, manipulating transfer pricing, falsifying indicators, and incomplete disclosure of transactions with related parties.

Research methods. The research applies methods of analysis, synthesis, comparison, generalization, institutional approach, and case study to examine international and Ukrainian practices of violating the principle of completeness.

The purpose of the article is to study the essence of the principle of completeness in accordance with IFRS and the legislation of Ukraine, as well as to identify the mechanisms of its violation in the conditions of complex corporate structures.

Results. The theoretical and normative foundations of the principle of full disclosure are analyzed, and the main types of manipulations are identified: concealing transactions with related parties, offsetting liabilities for the balance sheet, non-disclosure of significant transactions, falsifying indicators, and masking beneficiaries. International and Ukrainian examples of violations of the principle of full disclosure are studied. A comparison of international and Ukrainian cases proves that in both cases, the main factor was the existence of complex networks of corporate ties. They created opportunities for circumventing the requirements of completeness and concealing essential information. The results obtained allow us to assert that ensuring the completeness of financial information is possible only under the condition of a comprehensive combination of regulatory requirements, independent audit, and transparency of the ownership structure.

Prospects. Further research is required to quantify the scale of incomplete disclosure of information, the use of digital technologies to identify anomalies in reporting, and to improve institutional control practices in Ukraine.