ACIS3115 Chapter 2 - Chapter 2 Conceptual Framework...

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1 Chapter 2 Conceptual Framework Underlying Financial Accounting
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Mes notes On doit savoi quil ya 7 statement ecrit par le FASB. On a pas a les memorise une par une. ACC info should be useful is decision making. Pour etre useful, acc info should be reliable et relevance. Memorise les def de relevance, reliability et chacune de ses componante. Ou il peut demande, quelle facteur fait partie de reliability. Distinguish quelle est la primary et quel sont les secondery. 2
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3 Overview This chapter discuss the basic concepts underlying the conceptual framework. Conceptual Framework Underlying Financial Accounting Need Development Qualitative Characteristics Basic Elements Basic Assumptions Basic Principles Constraints Conceptual Framework First Level: Basic Objectives Second Level: Fundamental Concepts Third Level: Recognition and Measurement
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4 Conceptual Framework Why need? Enables the FASB to issue a coherent set of standards. Quickly solve new and emerging practical problems by referring to an existing framework of basic theory
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5 Development of a Conceptual  Framework (1) The FASB has issued seven “Statement of Financial Accounting Concepts (SFAC)” (six SFACs for business enterprises) SFAC No. 1, “Objectives of Financial Reporting by Business Enterprises”: Presents the goals and purposes of accounting SFAC No. 2, “Qualitative Characteristics of Accounting Information”: Examines the characteristics that makes accounting information useful SFAC No. 3, “Elements of Financial Statements of Business Enterprises”: Provides definitions of items in F/S (e.g., assets, liabilities, revenues, and expenses) SFAC No. 4, “Objectives of Financial Reporting by Nonbusiness organizations”
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6 Development of a Conceptual  Framework (2) SFAC No. 5, “Recognition and Measurement in Financial Statements of Business Enterprises”: Sets forth fundamental recognition and measurement criteria and guidance on what information should be formally incorporated into F/S and when SFAC No. 6, “Elements of Financial Statements”: Replaces SFAC No. 3 and expands its scope to include not-for-profit organizations SFAC No. 7, “Using Cash Flow Information and Present Value in Accounting Measurements”: Provides a framework for using expected future cash flows and present values as a basis for measurement.
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7 Overview of the Conceptual  Framework
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8 Conceptual Framework First level: Objectives of financial reporting Second level: Qualitative characteristics that make accounting useful Elements of financial statements (assets, liabilities, etc) Third level: Recognition and measurement concepts Assumptions Principles Constraints
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9 Conceptual Framework Underlying Financial Accounting Need Development Qualitative Characteristics Basic Elements Basic Assumptions Basic Principles Constraints Conceptual Framework First Level: Basic Objectives Second Level: Fundamental Concepts Third Level: Recognition and Measurement
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