Chapter 17 - Solution Manual

05 2disclosure of accounting policies related to

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05-2Disclosure of accounting policies related to specific financial statement line items are addressed in the related Topics. > Importance of Accounting Policies Disclosure 05-3The accounting policies of an entity are the specific accounting principles and the methods of applying those principles that are judged by the management of the entity to be the most appropriate in the circumstances to present fairly financial position, cash flows, and results of operations in accordance with generally accepted accounting principles (GAAP) and that, accordingly, have been adopted for preparing the financial statements. 05-4The accounting policies adopted by an entity can affect significantly the presentation of its financial position, cash flows, and results of operations. Accordingly, the usefulness of financial statements for purposes of making economic decisions about the entity depends significantly upon the user's understanding of the accounting policies followed by the entity. 235-10-15 Scope and Scope Exceptions > Overall Guidance 15-1The Scope Section of the Overall Subtopic establishes the pervasive scope for the Notes to Financial Statements Topic. > Entities 15-2The guidance in the Notes to Financial Statements Topic applies to all entities. 235-10-50 Disclosure > Accounting Policies Disclosure 50-1Information about the accounting policies adopted by an entity is essential for financial statement users. When financial statements that are issued or are available to be issued (as discussed in Section 855-10-25) purport to present fairly financial position, cash flows, and results of operations in accordance with generally accepted accounting principles (GAAP), a description of all significant accounting policies of the entity shall be included as an integral part of the financial statements. In circumstances where it may be appropriate to issue one or more of
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374 the basic financial statements without the others, purporting to present fairly the information given in accordance with GAAP, statements so presented also shall include disclosure of the pertinent accounting policies. > Accounting Policies Disclosure in Interim Periods 50-2The provisions of the preceding paragraph are not intended to apply to unaudited financial statements issued as of a date between annual reporting dates (for example, each quarter) if the reporting entity has not changed its accounting policies since the end of its preceding fiscal year. > What to Disclose 50-3Disclosure of accounting policies shall identify and describe the accounting principles followed by the entity and the methods of applying those principles that materially affect the determination of financial position, cash flows, or results of operations. In general, the disclosure shall encompass important judgments as to appropriateness of principles relating to recognition of revenue and allocation of asset costs to current and future periods; in particular, it shall encompass those accounting principles and methods that involve any of the following: a.
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