AC2101 S1 2014 Seminar 1.pptx

Comparability over time across dierent entities

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Unformatted text preview: ight. 7 Clicker Question Per the current FRS Framework, the objective of financial reporting is to provide… 1.  Info about the fin position, performance and changes in fin position of an enterprise that is useful to a wide range of users in making economic decisions 2.  Fin info about the reporting entity that is useful to existing & potential investors, lenders and other creditors in making decisions about providing resources to the entity 15 Why do we need accounting? §༊  Information asymmetry between stakeholders ü༏ Adverse Selection: information advantage ü༏ Moral Hazard: unable to observe manager’s effort 16 8 Clicker Question Per the new Framework, the fundamental qualitative characteristics of useful financial info include… 1.  2.  3.  4.  5.  6.  7.  Comparability Faithful representation Relevance Reliability Understandability Timeliness Verifiability 17 Review: Qualitative Characteristics 1.  Relevance •  Predictive value; Confirmatory value; Materiality (nature & size; entity- specific) 2.  Faithful representation •  Complete (within bounds of materiality & costs); Neutral; Free from error (≠ accurate in all respects) 3.  Comparability •  Over time; Across different entities; achieved via consistency; ≠ uniformity 4. Verifiability •  Different knowledgeable & independent observers could reach consensus, not necessarily complete agreement 5. Understandability Items (1) & (2): fundamental QC Items (3) to (6): enhancing QC *  Clearly & concisely 6. Timeliness 18 9 Accounting Recognition, Measurement & Disclosure Recognition -   Process of incorporating an item in an entity’s balance sheet or income statement -...
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This document was uploaded on 02/10/2014.

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