The Conceptual Framework and
Objectives of Financial Reporting
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Conceptual Framework - Intermediate Accounting - Lecture Slides, Slides of Accounting
In this course topics like Accounting Process, Balance Sheet and Owners’ Interests, Cash Flows, Conceptual Framework, Control of Cash, Expense Recognition, Income Statement, Inventory, Recognition, Recognition and Measurement are covered. This lecture includes: Conceptual Framework, Financial Reporting, Allocation of Resources, Evaluation of Past Performance, Expectations of Future Performance, Enterprise Principle, Investors, Role of Accounting, Sources of Gaap, Accounting Procedure
Typology: Slides
2012/2013
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The Conceptual Framework and Objectives of Financial Reporting
What is Accounting Used For?
- Decision Making
- Evaluation of past performance
- Expectations of future performance
- Allocation of Resources
Role of Accounting
Accounting
Information
Investors
Learning Objective
2. Trace the evolution of generally
accepted accounting principles
GAAP
Sources of GAAP
Committee on Accounting Procedures
Accounting Principles Board
Financial Accounting Principles Board
Committee on Accounting Procedure CAP
1939 - 1959
First private body concerned with writing accounting rules Issued 51 Accounting Research Bulletins Members were practicing CPAs An “ad hoc” approach
Financial Accounting Foundation FAF
Established 1973
Appoints members of Financial Accounting Standards Board (FASB) Appoints members of Financial Accounting Standards Advisory Committee (FASAC) Provides financial support to FASB Contributions from industry & CPA firms
Financial Accounting Standards Board FASB Established 1973
7 members
Members are full time, well paid
Responsible only to FAF
Passage of standards requires 5 out of 7 votes
International Accounting Standards
- International Accounting Standards Committee
- Standards less specific
- “Principle Based”
- Not allowed by SEC
Accounting Standard Setting
- A political process
Conceptual Framework
Statements of Financial Accounting Concepts (SFACs)
Purpose:
Establish the objectives and concepts to be used by the FASB in developing standards for financial reporting
Conceptual Framework SFACs
1 Objectives of Financial Reporting
2 Qualitative Characteristics
4 Objectives for Nonbusiness Organizations
5 Recognition & Measurement
6 Elements of Financial Statements
Learning Objective
4. Interpret the meaning of the
qualitative characteristics of
accounting information enumerated
in the conceptual framework
Objectives
- Useful for decision making
- Information about future cash flows
- Information about resources, claims to resources, changes in resources - Liquidity - Solvency - Flexibility - Profitability