Final answer:
Related party transactions must be disclosed in financial statements, including the relationship and transaction description (Option B). This applies to all entities, not just public companies, to ensure transparency comparable to the transparency sought by disclosure requirements in political contributions and lobbying.
Step-by-step explanation:
The subject of your question pertains to related party transactions and the requirements for disclosure in financial reporting. For these transactions, disclosure is mandated not only for public companies but for all entities. This disclosure includes information about the nature of the related party relationship and a description of the transactions. While the amount of detail required can vary by jurisdiction, the essential elements of disclosure help to ensure transparency in financial statements.
Option B is correct. According to generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), disclosures must include the nature of the relationship between the parties and a description of the transactions. Also, the concept of 'arms-length' is important here. While related party transactions are often not considered to be at 'arms-length', meaning they may not be conducted under the same terms and conditions as transactions with independent parties, it does not negate the need for disclosure.
It is also important to note that disclosure requirements are designed to provide transparency which is crucial for stakeholders who have a right to understand the financial dealings of an entity, similar to how disclosure requirements function in the realm of political contributions and lobbying efforts.