ACCO 400 Study Guide - Final Guide: Day Count Convention, Historical Cost, Revenue Recognition
7 Dec 2018
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Acco 400 final review: chapter conclusions: accounting under ideal conditions: Ideal conditions: relevance: provides information about the firm"s future economic projections , reliability: faithfully represents the firm"s financial position and result of operations . Complete - free from material error - free from bias: assumptions: known fcf + interest rate. Ideal conditions of uncertainty: assumptions: states of nature objective + publicly known + given interest rate. Income recognition: as changes in expected pv occur. Downsides of no ideal c: estimates can be wrong and hard to state= legal liabilities: greater relevance requires more estimates, but, more estimates decrease reliability. Solution: relevance and reliability must be traded off and use rra as supplement info not main. Accounting: different trade-offs between, relevance and reliability, timing of revenue recognition, recognition lag, matching. Solution: the mixed measurement model: current value accounting for: a/r, fin. A/p, pensions: historical cost accounting for: invtry , ppe, goodwill. It claims that investor decisions to maximize expected utility eu.
