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CH2MainIdeasHandoutSolution - MAIN IDEAS IN CH 2 HANDOUT...

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MAIN IDEAS IN CH 2 HANDOUT SOLUTION CONCEPUTAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING The main ideas you need to know in this chapter include the following (identified by chapter learning objectives): LO1: Describe the usefulness of a conceptual framework. LO2: Describe the FASB’S efforts to construct a conceptual framework. LO3: Understand the objectives of financial reporting. LO4: Identify the qualitative characteristics of accounting information. LO5: Define the basic elements of financial statements. LO6: Describe the basic assumptions of accounting. LO7: Explain the application of the basic principles of accounting. LO8: Describe the impact that constraints have on reporting accounting information. LO1: DESCRIBE THE USEFULNESS OF A CONCEPTUAL FRAMEWORK. CH 2 outlines the development of a conceptual framework for financial accounting and reporting by the FINANCIAL ACCOUNTING STANDARDS BOARD (“FASB”), which is affected by many external factors. It is composed of basic objectives, fundamental concepts, and operational guidelines. These notions are discussed in CH 2 and should enhance your understanding of the topics covered in intermediate accounting. This is an important baseline chapter to reintroduce (from ACCT. 280) and further develop the conceptual framework that shapes the numbers we see. Recall our discussion in the first class: “accounting is a lot more than just numbers.” The numbers are the easy part – it’s getting to the numbers and presenting the information consistent with the overarching conceptual framework, the specific standards that apply, and the underlying analysis of the business events that is the challenge. As business becomes increasingly complex, the CONCEPTUAL FRAMEWORK provides a guide to the consistent development of financial reporting rules that reflect its purpose. It serves as the underlying fabric which brings together the implementation rules and underlying business events into unity. MAIN IDEAS IN CH 2 HANDOUT SOLUTION 1 Conceptual Framework FASB/Other rules & guidance Analysis of underlying business events
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The CONCEPTUAL FRAMEWORK provides coherence in rules and standards, quick solutions to new and emerging practical problems by reference to an existing framework of basic theory, increased user understanding of and confidence in financial reporting, and enhanced comparability among companies’ financial statements. LO2: DESCRIBE THE FASB”S EFFORTS TO CONSTRUCT A CONCEPTUAL FRAMEWORK. The FASB recognized the need for a conceptual framework upon which a consistent set of financial accounting standards could be based. The FASB has issued six Statements of Financial Accounting Concepts (SFAC NO. 1 through 6), relating to financial reporting. For example, 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 (or attributes) that make accounting information useful such as relevancy, reliability, comparability, and consistency.
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CH2MainIdeasHandoutSolution - MAIN IDEAS IN CH 2 HANDOUT...

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