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Lecture 3

AFM101 Lecture Notes - Lecture 3: Deferral, Share Capital, Retained Earnings

3 pages66 viewsFall 2018

Department
Accounting & Financial Management
Course Code
AFM101
Professor
Haihao Lu
Lecture
3

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AFM101 Lecture 3 GAAPs, Ethics, Transactions
GAAPs and the Accounting Conceptual Framework:
GAAPs: Generally Accepted Accounting Standards
o A set of regulations that accountants have to follow to ensure their financial information
is accurate and relevant
o IFRS: International Financial Reporting Standards
A standardized set of accounting regulations used by several countries around
the world, excluding the US
Very costly to apply
Canadian public enterprises are required to follow IFRS
o ASPE: Accounting Standards for Private Enterprises:
A set of accounting regulations made specifically for private enterprises
Canadian private enterprises can use either IFRS or ASPE; however, ASPE is
mainly used
Accounting Conceptual Framework: A system that ensures that the reported financial info about
any business entity is useful for internal and external users
o Fundamental Qualitative Characteristics: Requirements to ensure reported financial info
is useful
Relevance: Reported financial info must make an influence on the decision
making of potential users
Faithful Representation: Reported financial info must be complete, unbiased,
and accurate
o Enhancing Qualitative Characteristics: Can impact the degree of usefulness of reported
financial info
Comparability: Reported financial info can be easily compared across time and
with other companies
Verifiability: Reported financial info can be proven complete, accurate, and
reliable
Timeliness: Reported financial info can still influence decision-making for
potential investors (the info hasn’t expired to the point of being useless)
Understandability: Reported financial info can be understandable for potential
users
o Assumptions: Guidelines to follow when reporting financial info
Going Concern: A business will stay running until closure is inevitable
Separate Entity: Personal finances stay separate from business transactions
Historical Cost: Assets must be recorded at their purchase price
Revaluation Model: If a long-term asset’s value has changed significantly
since being purchased, their account balance can be altered once
Stable Monetary Unit: The dollar’s purchasing power remains stable over time
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