Chapter 2 notes - Conceptual Framework Conceptual...

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Conceptual Framework Conceptual Framework - a coherent system of interrelated objectives and fundamentals that can lead to consistent rules and that prescribes the nature, function, and limits of financial accounting and financial statements. The Need for a Conceptual Framework --A soundly developed conceptual framework enables the FASB to issue more useful and consistent pronouncements over time, a coherent set of GAAP should result. --The framework should increase financial statement user’s understanding of and confidence in financial reporting. --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 --In 1976 the FASB began to develop a conceptual framework that would be a basis for setting accounting rules and for resolving financial reporting controversies. The FASB has since issued SFACs. Basic Elements --Basic elements are an important aspect of developing any theoretical structure is the definitions to be included in it. --Basic elements include: Assets, liabilities, equity, investments by owners, distributions to owners, comprehensive income, revenues, expenses, gains and losses. --Assets, liabilities, and equity describes amounts of resources and claims to resources at a moment in time. --The other seven elements describe transactions, events, and circumstances that affect a company during a period of time. Third Level: Recognition and Measurement Concepts --This level explains the concepts of how companies should recognize, measure, and report financial elements and events. Basic Assumptions
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This note was uploaded on 02/12/2012 for the course BT 1003 taught by Professor As during the Spring '11 term at American Jewish University.

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Chapter 2 notes - Conceptual Framework Conceptual...

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