Chapter 02-1

Chapter 02-1 - Chapter 2 Financial Statements and the...

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Unformatted text preview: Chapter 2 Financial Statements and the Annual Report Primary Objective of Financial Reporting Invest?? Borrow $$?? Sell stocks or bonds?? Start new business?? Loan $$?? Extend credit $$?? LO1 Provide information for decision making Secondary Objectives of Financial Reporting Reflect prospective cash receipts to investors and creditors Reflect prospective cash flows to the company Reflect the companys resources and claims to its resources Assets = Liabilities + OE Qualitative Characteristics Understandability Relevance Reliability LO2 Represents what it purports Has capacity to Make a difference To those willing to take The time to understand it Qualitative Characteristics From one period to the next Consistency between companies Comparability Qualitative Characteristics Conservatism Will it make a difference To the decision maker? All else equal, choose Least optimistic estimate Materiality Basic Structure of a Classified Balance Sheet Cur r ent assets + Noncur r ent (long-ter m) assets...
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Chapter 02-1 - Chapter 2 Financial Statements and the...

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