14ConceptualFramework - As an aid in developing more useful...

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As an aid in developing more useful, consistent standards. As an aid in solving practical problems by reference to an existing framework of basic theory. In combination with good judgment, a sound body of theory will help accountants focus on logical and consistent solutions to accounting problems as they arise.
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Recognition and Measurement Criteria (SFAC No. 5 and SFAC No. 7) Environment Implementation Implementation assumptions principles constraints Objectives of Financial Reporting (SFAC No. 1) Qualitative Characteristics of Accounting Information (SFAC No. 2) Elements of Financial Statements (SFAC No. 6)
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Objectives To provide information: Useful for investor and creditor decisions. That helps predict cash flows. About economic resources, claims to resources, and changes in resources and claims. Elements Recognition and Measurement Concepts Constraints Conceptual Framework Qualitative Characteristics Financial Statements Continued
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Elements Assets Liabilities Equity Investments by Owners Distributions to owners Revenues Expenses Gains Losses Comprehensive Income Recognition and Measurement Concepts Assumptions Economic entity Going concern Periodicity Monetary unit Principles Historical cost Realization Matching Full Disclosure Objectives Financial Statements Balance sheet Income statement Statement of cash flows Statement of shareholders’ equity Related disclosures Constraints Cost effectiveness Materiality Conservatism Qualitative Characteristics Understandability Primary Relevance Reliability Secondary Comparability Consistency
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Provide Information: 1. Useful in investment and credit decisions. 2. Useful in assessing future cash flows. 3. About enterprise resources, claims to resources, and changes in them. Directed at persons with a reasonable level of understanding of business and economic activities .
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OBJECTIVE 1 - Provide useful information for making rational investment and credit decisions OBJECTIVE 2 - Provide information to help investors and creditors assess the amount, timing, and uncertainty of future net cash flows to them
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OBJECTIVE 3 : Provide information about entity’s economic resources and claims on those resources. That is, provide information about current financial position or state. Balance Sheet (B/S)
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OBJECTIVE 4 - Provide information about the entity’s financial performance Income Statement (I/S) for the period Performance = Accomplishments compared to Sacrifices Revenues matched with Expenses
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OBJECTIVE 5 - Provide information about uses and sources of cash Statement of Cash Flows for the period Operating Activities Investing Activities Financing Activities
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OBJECTIVE 6 - Provide information for assessing stewardship.
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