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acc - 220 - week 3 dq 1 - accounting information must be...

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The primary objective of financial reports is to provide information that is useful for decision-making. Information of any sort is relevant if it would influence a decision. Accounting information is relevant if it would make a difference in a business decision. The information in the statements is considered relevant because it provides a basis for forecasting future earnings. Accounting information is also relevant to business decisions because it confirms or corrects prior expectations. In addition, for accounting information to be relevant it must be timely. That is, it must be available to decision makers before it loses its capacity to influence decisions. In order to increase the timeliness of financial reports, the SEC recently required that companies provide their annual report to investors within 60 days of their year-end. They had previously been allowed up to 90 days. Reliability of information means that the information can be depended on. To be reliable,
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Unformatted text preview: accounting information must be verifiable we must be able to prove that it is free of error. In addition, the information must be a faithful representation of what it purports to be it must be factual. Finally, accounting information must be neutral it cannot be selected, prepared, or presented to favor one set of interested users over another. In accounting, comparability results when different companies use the same accounting principles. At one level, U.S. accounting standards are comparable because they are based on certain basic principles and assumptions. These principles and assumptions allow for some variation in methods, however. To make comparison across companies easier, each company must disclose the accounting methods used. From the disclosures, the external user can determine whether the financial information is comparable and try to make adjustments....
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