Chapter Two - Chapter Two Conceptual Framework The Need for...

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Unformatted text preview: Chapter Two Conceptual Framework The Need for a Conceptual Framework o To be useful, rulemaking should build on and relate to an established body of concepts or objectives o To develop a coherent set of standards o To increase understanding o To enhance comparability among companies financial statements o The profession should be able to more quickly solve new and emerging practical problems by referring to an existing framework of basic theory Development of a conceptual framework o The FASB has issued seven statements of financial accounting concepts (FAC) #1: objectives of financial reporting; presents the goals and purposes of accounting #2: Qualitative Characteristics of Accounting: examines the characteristics that make accounting information useful #3: Elements of Financial Statement of Business Enterprise: provides definitions of items in financial statements, such as assets, liabilities, revenues, and expenses #5: Recognition and Measurement in Financial Statements of Business Enterprise; sets criteria and guidelines on what is incorporated into financial statements and when #6: Elements of Financial Statements; (replaces SFAC #3) includes non-profit organizations #7: Using Cash Flow Information and Present Value in Accounting Measurements; provides a framework for using expected cash flows...
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Chapter Two - Chapter Two Conceptual Framework The Need for...

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