oct5inclass - Communication Case 1-7: Accounting standard...

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Communication Case 1-7: Accounting standard setting One of your friends is a financial analyst for a major stock brokerage firm. Recently she indicated to you that she had read an article in a weekly business magazine that alluded to the political process of establishing accounting standards. She had always assumed that accounting standards were established by determining the approach that conceptually best reflected the economics of a transaction. Required : What is meant by the political process for establishing accounting standards?
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Conceptual Framework (FASB/IASB Revision) What is the Objective of Financial Reporting? To provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers.
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CHARACTERISTICS You have decided to buy a new automobile and have been gathering information about the purchase price. The manufacturer’s web site shows a “list price” of $ 24,500, which includes your preferred options: leather trim and CD player. You have also consulted the “Blue Book” guide to car prices and found that the average price paid for a similar new vehicle is $ 19,500. However, the guide also indicates that recent selling prices have ranged from $ 18,000 up to $ 22,000. Required: 1. Which price quote, the “list price” or the “Blue Book” average price, is the more relevant for your decision? Why? 2. Which price quote is more representationally faithful ? Why?
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The manufacturer’s web site shows a “list price” of $ 24,500, which includes your preferred options: leather trim and CD player. You have also consulted the “Blue Book” guide to car prices and found that the average price paid for a similar new vehicle is $ 19,500. However, the guide also indicates that recent selling prices have ranged from $18,000 up to $ 22,000. 1. Which price quote, the “list price” or the “Blue Book” average price, is the more relevant for your decision? Why? The
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This note was uploaded on 11/20/2011 for the course FINANCE 640,722 taught by Professor Chabiyo,reeves during the Fall '11 term at Ohio State.

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oct5inclass - Communication Case 1-7: Accounting standard...

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