BUS 251 Chapter Notes - Chapter 2: Financial Statement, Accounting Equation, Accrual
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15 Aug 2016
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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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