Chapter 1 Flashcards
Environment and theoretical structure of financial accounting
Primary objective of Financial accounting
Provide useful info for external users
Information to evaluate amounts, timing and uncertainty
Key variables in investment decision
Expected rate of return and risk
Cash basis
Focus on cash receipts related to goods and services
Accrual basis
Measure underlying economic events. Better for economic reality
GAAP
Dynamic set of broad and specific guidelines
Facilitated decision making by investors and creditors allowing to compare companies easily
SEC
Ultimate authority to set financial reporting standards but delegates responsibility to private sector
FASB
Supported by the Financial Accounting Foundation
Accounting Standards Codification
Only source of authoritative nongovernmental US GAAP
Accounting standards update
Updated incorporate into the ASC
International accounting standards board
Goal to develop high quality, understandable and enforceable global accounting standards
Conceptual framework foundation
Relevance and faithful representation
Enhancing characteristics
Compatibility consistency, verifiable, timely, and understandable
Constraint
Cost effectiveness
Mixed attribute measurement
Measure different economic events in different way
Relevance
Predictive value, confirmatory value, and materiality
