Textbook Notes (363,141)
Canada (158,218)
MGAB01H3 (126)
G.Quan Fun (21)
Chapter 2

Chapter 2 notes

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University of Toronto Scarborough
Financial Accounting
G.Quan Fun

Chapter 2 Financial StatementsFramework, Presentation, and Usage Notes Conceptual Framework of Accounting N conceptual framework of accounting : a coherent system of interrelated elements that guides the development and application of accounting principles; it includes the objective of financial reporting, qualitative characteristics of accounting information, elements of financial statements, and recognition and measurement criteria N as a foundation for accounting, the conceptual framework does the following: 1. It ensures that existing standards and practices are clear and consistent. 2. It makes it possible to respond quickly to new issues. 3. It increases the relevance, faithful representation, comparability, and understandability of financial reporting results. N International Accounting Standard Board (IASB) formed to try to reduce areas of difference and unify global standard-setting N after 2011, Canadian standards with cease to exist for profit-oriented publicly traded companies as they move to the International Financial Reporting Standards (IFRS) N not-for-profit companies and private companies will move to simplified set of standards considered to be suitable for their needs N with such an unprecedented level of change in accounting standards about to occur, never before has conceptual framework been as important as it is today to companies and other users of accounting, whose need to interpret financial data accurately always remains the same N conceptual framework of accounting has four main sections 1. The objective of financial reporting 2. The qualitative characteristics of accounting information 3. The elements of financial statements 4. Recognition and measurement criteria (assumptions, principles, and constraints) The Objective of Financial Reporting N objective of financial reporting : the objective of financial reporting is to provide information that is useful to individuals making investment and credit decisions N financial reporting should provide information about the amounts, timing, and uncertainty of future cash flows, economic resources (assets), and claims to those resources (liabilities and equity), and it should also include managements explanations about the companys financial activities, since management knows more about the company than external users do Qualitative Characteristics of Accounting Information Relevance N relevance : a quality for describing information that makes a difference in a decision; it should have predictive and feedback value and be timely N predictive valuerelevant info helps users make predictions about potential effects of
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