Textbook Notes (363,178)
Canada (158,245)
MGAB01H3 (126)
Liang Chen (50)
Chapter 2

Chapter 2 Notes

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University of Toronto Scarborough
Financial Accounting
Liang Chen

Chapter 2 01 Chen, Liang MGTB05, Lec. 03 Chapter 2: Financial Statements Framework, Presentation, and Usage Conceptual Framework of Accounting - The conceptual framework of accounting L8,.4K070398890241L390770O,904-M0.9L;08 and fundamentals that can lead to consistent standards and that prescribes the nature, 1:3.9L43,3OL2L98411L3,3.L,O,..4:39L3J89,9020398 - Why do we need conceptual framework of accounting? N It ensures that existing standards and practices are clear and consistent N It makes it possible to respond quickly to new issues N It increases relevance, faithful representation, comparability, and understandability of financial reporting result - Accounting standards may differ from country to country so the International Accounting Standards Board (IASB) decided to adapt a new accounting standard, International Financial Reporting Standard (IFRS) starting January 1, 2011 - IFRS will only apply to profit oriented publicly traded companies (partnership and sole proprietorship will not have to adapt to this new standard) - The conceptual framework of accounting has four main sections: N The objective of financial reporting N The qualitative characteristics of accounting information N The elements of financial statements N Recognition and measurement criteria (assumptions, principles, and constraints) The Objective of Financial Reporting - The main objective of financial reporting is to provide information that is useful to individuals who are making investment and credit decisions Qualitative Characteristics of Accounting Information - To be useful in decision makings, information should have these qualitative characteristics: N Relevance N Faithful representation N Comparability N Understandability Relevance - Relevant information is said to help users make predictions about the potential effects of past, present, or future transactions or other events. - It is therefore said to have predictive value - Relevant information helps users confirm or correct their previous expectations, this is called feedback value - Information must also be timely meaning that it must be available to decision makers before it loses its ability to influence their decisions www.notesolution.com
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