ACC 414 Chapter Notes - Chapter 2: Conceptual Framework, Financial Statement, Comprehensive Income

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Conceptual framework: a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements. Rationale for conceptual framework: standard setting should build on an established body of concepts and objectives. Resulting in a coherent set of standards and rules. Such framework should increase financial statement users understanding of and confidence in financial reporting (as well of comparability of different companies: should be possible to solve new and emerging practical problems more quickly. Doing so by using good judgment and with the help of a universally accepted conceptual framework. Qualitative characteristics of useful information: determining which alternative gives the most useful information for decision making purposes (decision usefulness, fundamental qualitative characteristics. Relevance capability of making a difference in a decision. It needs predictive value: information that helps users make predictions about the final outcome of past/present/future events.

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