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Unformatted text preview: What are the major objectives of financial reporting? Who uses financial reporting? What type of information will each user group need? Why? The major objectives of financial reporting are 1. Information that is useful in decision making to current and impending investors and creditors. 2. Information that helps current and impending investors and creditors evaluate the amounts, timing, and uncertainty of net cash inflows. 3. Recognizes the economic resources of an enterprise, the entitlements to those resources, and the effects that transactions, events, and conditions have on those resources. Current and impending investors and creditors use financial reporting. The financial statements needed to completely understand the companys financial information are the balance sheet, the income statement, the statement of cash flows, and the statement of owners equity. What is the purpose of generally accepted accounting principles (GAAP) and the accounting cycle? Is it possible to deviate from GAAP and the accounting cycle and still prepare financial statements? Why? What are some possible consequences of this course of action? What organizations are responsible for governing financial reporting? What is the role of each organization? How have the roles changed in the last 20 years? How might their roles change in the next 20 years? There are four organizations that have developed the generally accepted accounting principles (GAAP). The Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Government Accounting Standards Board (GASB) are responsible for governing financial reporting. The SEC is a federal agency that helps to develop and standardize financial information presented to stockholders. The AICPA is a national professional organization of practicing Certified Public Accountants that has been an important part of developing the GAAP. The FASB establishes and improves the standards of financial accounting and reporting for the guidance and education of the public. The GASB sets standards for state and local government. Before 1973 there was another organization that was in place the Accounting Principles Board. The boards opinions were based on research studies and were supposed to be supported by reasons and analysis. Their roles might change in the next 20 years because there might be a need to follow more along the lines of the international standards....
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