AFM101 Chapter Notes - Chapter 6: Sustainability Reporting, Accountant, Financial Statement
7 Jun 2018
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AFSA Education
AFM 101 Chapter 5 and 6 Notes
Constraints of Accounting Measurement
• Cost constraint: suggests that information should be produced only if
the perceived benefits or increased decision usefulness exceed the
expected costs of providing that information
o Difficult to measure
o There are standards such as mandatory disclosure
• Prudence: suggests that care should be taken not to overstate assets
and revenues or understate liabilities and expenses
• Usefulness of information depends on the credibility of information in
financial reports
• Compliance in practice and professional codes of conduct help
improve credibility for the legally responsible
Earnings Measurement
• Ideally companies should measure their assets and liabilities at fair
value
• Accounting standards set because of the desire to provide relevant
information for decision makers
• Different Asset/ Liability Group -> Different Valuation Basis (refer to
chart on pg 310)
Statement of Comprehensive Income
• Public accounting enterprises are required to disclose additional
information in a statement of comprehensive income
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AFM101 Full Course Notes
Verified Note
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Document Summary
Statement of comprehensive income: public accounting enterprises are required to disclose additional information in a statement of comprehensive income, include unrealized gains and losses. Cash flows from operating activities: reports cash flows associated with operations. Cash flows from investing activities: associated with purchase and sale of productive assets and investments in other companies. Cash flows from financing activities: related to financing the business through borrowing and repaying loans, issuances and repurchases of shares, and dividend payments. Notes to financial statements: notes include 3 types of information, description of the key accounting policies applied to the company statements, additional details supporting reported amounts in the financial statements, relevant information not disclosed in the statements. Accou(cid:374)ti(cid:374)g policies applied i(cid:374) the co(cid:373)pa(cid:374)y"s state(cid:373)e(cid:374)ts: ifrs permits companies to select from alternative methods for measuring the effects of transactions. 2: second category of notes provides supplemental information concerning the data shown in the financial statements, ex. Can show revenues broken down by geographic region.
