BUS 251 Chapter Notes - Chapter 2: Financial Statement, Accounting Equation, Accrual

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Ch. 2 – Analyzing Transactions and Their Effects on Financial Statements
- cooperative = work to benefit members rather than make profits
ACCOUNTING STANDARDS
- IFRS dvlped to minimize differences in financial reporting across countries & to reduce need for
companies to generate diff sets of financial info in each country they operate
- ASPE represents set of simplified standards that Canadian standard setters have est to reduce financial
reporting burden for private companies
- objective of IFRS/ASPE: produce financial reporting tat is useful to financial statements users
 focus on need of shareholders (current & potential) & creditors in determining useful financial
info
 provide info for shareholders & creditors in making decisions about providing resources to
reporting company
- Canadian Accounting Standards Board (AcSB) responsible for dvlping
& establishing accounting standards used by Canadian companies
 responsible for accounting standards for both private & public companies
QUALITATIVE CHARACTERISTICS OF FINANCIAL INFORMATION
- conceptual framework = underlying set of objectives & concepts that guide accounting standard-setting
bodies in justifying new standards & revising old ones
- IASB & AcSB’s conceptual frameworks dvlped w/ these objectives in mind:
 assist orgs as they dvlp new financial reporting standards
 assist accountants in determining how to account for items for which no specific accounting
standards have been dvlped
 assist users in their interpretation of info contained in financial statements
 according to this framework, useful financial info must be relevant & representationally faithful
 must matter to users’ decision-making & must rep events & transactions as they actually
took place
- fundamental qualitative characteristics = essential if financial info is to be considered useful, w/o them
info useless
 relevant
 representationally faithful
- enhancing qualitative characteristics = on their own cannot make useless info useful, but can enhance
usefulness of useful info
 comparability = need for users to be able to compare financial info of 2 companies, esp in same
industry, or same company across multiple periods
 verifiability = if 3rd party (w/ sufficient understanding) would arrive at similar result to that
used by company
 timeliness = older financial info less useful
 understandability = info presented in as clear & concise a manner as possible given its
complexity
- predictive value = predictive info that users can use as basis for dvlping expectations about company’s
future
- confirmatory value = info that provides feedback to users on previous assessments of company
 some financial info may reflect both values
- materiality = info/its absence would impact decision of financial statement user
 opposite = immaterial
 company-specific, varies according to company
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