33:010:272 Lecture Notes - Lecture 1: Income Statement, Balance Sheet, Legal Personality
7 Sep 2016
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Identifies, records, communicates economic events of organization to interested users. Internal users: people who work for company (managerial accounting) External users: investors, creditors, taxing authorities, the state, etc. (financial accounting) Congress passed sarbanes-oxley act of (sox) which requires companies to have certain controls for people to report upon anonymously without getting in trouble. Effective financial reporting depends on sound ethics: identify situation, identify/analyze elements of situation, look at alternatives and weigh impacts on stakeholders. Set of standards in u. s. generally accepted and practiced: balance sheet, income statement, stockholder equity, cash flows, disclosure. Standard-setting bodies: fasb: financial accounting standards board, sec: securities and exchange commission, iasb: international accounting standards board. Cost principle: companies must record assets at their costs (whatever was paid for them: this is the bedrock of us gaap. Fair value principle: current value must be reported. This is used by the iasb but is not the best approach as the current value can be hard to determine.
