Chap7 Class Notes 2010

Chap7 Class Notes 2010 - 1 CHAPTER 7 Generally Accepted...

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1 Victor Leung 1 ACCT2111 2010 Chapter 7 CHAPTER 7 Generally Accepted Accounting Principles and Financial Reporting I. (Obj 01) Nature of Accounting concepts and principles A. Generally accepted accounting principles (GAAP) GAAP are a set of standards and rules that are recognized as a general guide for financial reporting purposes. 1. “Generally accepted” means that these principles must have “substantial authoritative support.” 2. This support usually comes from the Financial Accounting Standards Board (FASB) and Securities and Exchange Commission (SEC). 3. The FASB has the responsibility for developing accounting principles in the United States. B. Development of generally accepted accounting principles 1. Securities and Exchange Commission (SEC) All publicly traded companies are required to file their financial statements to SEC. Has the legal authority to establish accounting standards for SEC filing. It delegates its standard-setting authority to the FASB. 2. Financial Accounting Standards Board (FASB) The most important body for developing and issuing accounting standards for financial reporting. Issues Statements of Financial Accounting Standards, and Statements of Financial accounting Concepts. Composed of seven full-time members and employs a full-time research and development staff. II. The Conceptual Framework of Accounting Developed by the FASB serves as the basis for resolving the inconsistent in accounting rules and practices from the previous problem-by-problem basis. The conceptual framework consists of: (Illustration 7-7, page 305) 1. Objectives of financial reporting. 2. Qualitative characteristics of accounting information. 3. Elements of financial statements. 4. Operating guidelines (assumptions, principles, and constraints).
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2 Victor Leung 2 ACCT2111 2010 Chapter 7 III. (Obj 02) Objectives of Financial Reporting (Statement of Financial Accounting Concepts No. 1, 1978) The FASB concluded that the objectives of financial reporting are to provide information that: 1. Is useful to those making investment and credit decisions. 2.
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This note was uploaded on 02/04/2012 for the course ACCT 2111 taught by Professor Eric during the Spring '11 term at CUHK.

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Chap7 Class Notes 2010 - 1 CHAPTER 7 Generally Accepted...

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