Chapter 2 Notes - Intermediate Accounting Review for Test 1...

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Intermediate Accounting Review for Test 1 Intermediate Accounting Chapter 2  Notes 1 st Level: OBJECTIVES To provide information that is useful: 1. for making investment and credit decisions 2. to investors and creditors in assessing cash flows 3. about economic resources, and the claims and changes to them (Balance Sheet) 2 nd Level: A.QUALITITATIVE CHARACTERISTICS o What qualities should useful information have? Primary 1. Relevance Must be capable of making a difference in a decision a. Predictive Value- helps predict outcome of past, present and future events b. Feedback Value- helps confirm or correct prior expectations c. Timeliness- hasn’t lost ability to influence decisions 2. Reliability a. Verifiability- when independent measures obtain similar results b. Representational Faithfulness- numbers and descriptions reflect reality c. Neutrality- can’t select info to favor one interested party over another Secondary 1. Comparability- from one company to another
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Chapter 2 Notes - Intermediate Accounting Review for Test 1...

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