COMM321 Chapter Notes - Chapter 2: Revenue Recognition, Measurement Uncertainty, The Need
13 Apr 2017
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Document Summary
Fundamental qualities: make accounting info useful for decision making. Relevance: capable of making a difference in a decision. Predictive value: helps users make predictions about the final outcome of past, present, and future events. Ex: separating income from continuing operations from that of operations that have been discontinued may help users predict future income. The regular activities would go here: non-operating. Feedback value: helps users confirm or correct their previous expectations. Ex: providing information about rental income and the value of the investment in rental properties might help users assess how well management is managing the investment in rental properties. Materiality: refers to how important a piece of information is. Representational faithfulness: accounting information is representationally faithful to the extent that it faithfully reflects or represents the underlying economic substance of an event or transaction. Information that is representationally faithful is complete, neutral, and free from material error. Transparent: reflects what really happened (should be true)
