MOS 3360 Chapter 1

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 3360A/B
Professor
Michelle Loveland
Semester
Fall

Description
The Canadian Financial Reporting Environment Role of Financial Reporting - Accounting theory and practice have always evolved and will continue to evolve. - Accounting is defined best by describing its 3 essential characteristics: 1. Identification, measurement, and communication of financial information about 2. Economic entities to 3. Interested persons. Financial Statements and Financial Reporting - The most frequently provided financial statements are: 1. Balance sheet 2. Income statement 3. Statement of cash flows 4. Statement of owners’ or shareholders’ equity or statement of retained earnings 5. Note disclosures Objective of Financial Reporting - Financial statements should provide information about: 1. The entity’s economic resources and claims to those resources and 2. Changes in those resources and claims - The objective of financial reporting is to provide useful information to users. Standard Setting Canadian Accounting Standards Board (AcSB) - Two basic premises underlie the process of establishing financial accounting standards: 1. The AcSB should respond to the needs and viewpoints of the entire economic community, not just the public accounting profession. 2. It should operate in full public view through a “due process” system that gives interested persons enough opportunity to make their views known. - The AcSB will only be in charge of private companies, non-for-profit organizations, and pension plans because private companies are less complex and more local. Thus, it does not need to comply with the international accounting standards. Whereas for public companies, financing are usually acquired globally throughout the stock market. Thus, it is easier to compare each other when all of them follow the same accounting standards. International Accounting Standards Board (IASB) Financial Accounting Standards Board and the Securities Exchange Commission - In the past, the FASB has had a substantial impact on Canadian financial reporting: 1. Since Canadian GAAP is based on principles and is fairly open to interpretation, accounting professionals have often relied on the more rule-oriented, specific guidance provided in the FASB pronouncements. 2. Many Canadian companies are also li
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