MGT220H5 Lecture Notes - Lecture 2: Deferral, Cash Flow, Human Capital
Document Summary
Why do we need accounting: objective = provide info that is decision useful (e. g. help allocate capital) resource allocation decisions include assessment of management stewardship (management role in maximizing shareholder value) Has predictive and feedback/confirmatory value: representational faithfulness. Complete: include all relevant required) info (materiality excluded info means not. Neutral: cannot favor one group of stakeholders over others. Should tell us real economic numbers of firm and what is really going on. Information measured and reported in similar way (company to company, and year to year) Allows users to identify real economic similarities and differences. How depreciation is done straight line, etc. Similar results achieved if same methods are used. Allows reasonably informed users to see the significance of the information. Provides enough information so that it is clear. Financial info not too messy and easily understandable. Fundamental qualitative characteristics (relevance and representational faithfulness) should be present in financial statements.
