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Ch01 - CHAPTER 1 THE CANADIAN FINANCIAL REPORTING...

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CHAPTER 1 THE CANADIAN FINANCIAL REPORTING ENVIRONMENT ASSIGNMENT CLASSIFICATION TABLE Topic Brief Exercises Writing Assignments Financial statements and financial reporting. 1, 3, 8 Environment of accounting. 15, 19 2, 7 Capital allocation. 2 Historical and current development of accounting standards. 7, 9, 16 Objectives of financial reporting. 4 Authoritative pronouncements and standard-setting bodies. 5, 6, 7, 9, 10, 12, 13, 14, 15, 19, 20 1, 3, 7 GAAP. 17, 18 5, 6 Professional judgment. 11 Ethical issues. 21 Challenges facing accounting 22 4, 8
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SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1-1 Financial accounting measures, classifies, and summarizes in report form those activities and that information which relate to the enterprise as a whole for use by parties both internal and external to a business enterprise. Managerial accounting also measures, classifies, and summarizes in report form enterprise activities, but the communication is for the use of internal, managerial parties, and relates more to subsystems of the entity. Managerial accounting is management decision oriented and directed more toward product line, division, and profit centre reporting. BRIEF EXERCISE 1-2 Accounting has the responsibility of measuring company performance accurately and fairly on a timely basis. This enables investors and creditors to assess the relative risks and returns of investment opportunities and channel resources more effectively. If a company’s financial performance is measured accurately, fairly, and on a timely basis, the right managers and companies are able to attract investment capital. Unreliable and irrelevant information leads to poor capital allocation, which adversely affects the securities market.
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BRIEF EXERCISE 1-3 Financial statements generally refer to the four basic financial statements: balance sheet, income statement, statement of cash flows, and statement of changes in owners’ or shareholders’ equity. Financial reporting is a broader concept; it includes the basic financial statements and any other means of communicating financial and economic data to interested external parties. Examples of financial reporting other than financial reports are annual reports, prospectuses, reports filed with government agencies, news releases, management forecasts or plans, and descriptions of an enterprise’s social or environmental impact. BRIEF EXERCISE 1-4 The objective of financial statements is to communicate information that is useful to investors, members, contributors, creditors, and other users in making their resource allocation decisions and/or assessing management stewardship. Consequently, financial statements provide information about: (a) an entity’s economic resources, obligations, and equity/ net assets; (b) changes in an entity’s economic resources, obligations, and equity/net assets; and (c) the economic performance of the entity ( CICA Handbook section 1000.15).
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