Chapter 6 Prof Wolfe_2

Chapter 6 Prof Wolfe_2 - Chapter 6 Communicating and...

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Unformatted text preview: Chapter 6 Communicating and Interpreting Accounting Information Guiding Principles for Communicating Useful Information Primary Objective of External Financial Reporting Primary Objective of External Financial Reporting To provide economic information to external users To provide economic information to external users for decision making. for decision making. Primary Qualitative Characteristics Primary Qualitative Characteristics Relevance: Timely and Predictive Feedback Value Relevance: Timely and Predictive Feedback Value Reliability: Accurate, Unbiased, and Verifiable Reliability: Accurate, Unbiased, and Verifiable Secondary Qualitative Characteristics Secondary Qualitative Characteristics Comparability: Across businesses Comparability: Across businesses Consistency: Over time Consistency: Over time Useful Information for Decision Making Information presented in financial reports is useful if it makes a difference in the context of making a decision. Relevance – Information disclosed in financial statements is relevant if it can influence user’s decision by helping them assess the impact of past activities and/or predict future events. Reliability – Information presented in financial statements is reliable when it is verifiable, unbiased, and accurate. Verifiability , neutrality , and representational faithfulness characterize the reliability of accounting information. Useful Information for Decision Making...
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This note was uploaded on 12/02/2010 for the course AFM 20220098 taught by Professor Sproule during the Spring '09 term at Waterloo.

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Chapter 6 Prof Wolfe_2 - Chapter 6 Communicating and...

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