Ch2 Outline

Ch2 Outline - CHAPTER 2 Conceptual Framework Underlying...

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CHAPTER 2 Conceptual Framework Underlying Financial Accounting LEARNING OBJECTIVES 1. Describe the usefulness of a conceptual framework. 2. Describe the FASB’s efforts to construct a conceptual framework. 3. Understand the objectives of financial reporting. 4. Identify the qualitative characteristics of accounting information. 5. Define the basic elements of financial statements. 6. Describe the basic assumptions of accounting. 7. Explain the application of the basic principles of accounting. 8. Describe the impact that constraints have on reporting accounting information. LECTURE OUTLINE The conceptual framework structure described in the chapter includes SFAC No. 5, “Recognition and Measurement in Financial Statements.” SFAC No. 5 indicates that an information item should meet four fundamental recognition criteria to be recognized in the financial statements: (1) Definitions. The item meets the definition of an element of financial statements. (2) Measurability. It has a relevant attribute (e.g., historical cost, current cost, etc.) which is measurable with sufficient reliability. (3) Relevance. The information is capable of making a difference in user decisions. (4) Reliability. The information is representationally faithful, verifiable, and neutral. Because current practice is generally consistent with these criteria, the overall approach of Chapter 2 remains unchanged. We have incorporated SFAC No. 5 into the third level of Illustrations 2-1 and 2-2. This was done by grouping the assumptions, principles, and constraints of the third level under the heading “Recognition and Measurement Concepts.” A. (L.O. 1) Need for a Conceptual Framework. 1.
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This note was uploaded on 04/05/2008 for the course ACC 310 taught by Professor Thomas during the Spring '08 term at N.C. State.

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Ch2 Outline - CHAPTER 2 Conceptual Framework Underlying...

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