RSM220H1 Chapter 2: CHAPTER 2 TEXTBOOK REVIEW An 8 page summary of the entire second chapter of the RSM220 textbook (Intermediate Accounting)
16 Oct 2011
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In practice, management needs to use many assumptions because of uncertainty in financial reporting estimate) in order to portray the economic reality. Standards must be free from bias or we will no longer have credible financial statements. Financial information must also be of sufficient quality and clarity that is allows reasonably informed users to see its significance. Information is material if including it or leaving it out would influence or change the judgment of a reasonable person. Materiality depends on both a relative amount and relative importance. Rule of thumb: any item representing a 5% or more of income from continuing operations is considered material. The item"s impact on other factors; on any sensitive number on the financial statements, should also be considered: costs vs. benefits. Therefore: contract contains both conditional and unconditional rights, only the unconditional rights represent economic resources (unless/until loss occurs)
