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Comparability ability to compare with similar

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Comparabilityability to compare with similar information reported byother entitiesand bythesame entityacross time periods.(Yr 1 – Yr 2 – Yr 3).This quality includesconsistency.Verifiabilitytwo independent parties using the same information would come to the sameconclusions…therefore it can be relied onTimelinessmust report the information in a timely manner before it loses its value.Understandabilityunderstandable to users with reasonable financial knowledge &willingness to study the information.II.SFAC #6 – UNDERSTANDING THE BASIC ELEMENTSConcept #6 defines the10 elementsthat are directly related to measuring the performance andfinancial position of a company.A.Statement of Financial Position – reported at apoint in time1.Assetsresources owned by or owed to the entity that will generateprobable future economic benefits.2.Liabilitiesprobable future sacrifices to settle an obligation from pasttransactions.3.Equitythe residual claims of owners.
B.Earnings for the Period – reported over aperiod of time4.Revenuesinflows of assets (cash or A/R), or the settlement of liabilities(unearned revenue) as a result of performing services/delivering goodsfrom on-going operations.5.Expensesoutflows of resources (expired costs) as a result of on-goingoperations.6.Gains-Increases/decreases in equity due to incidental transactions7.Losses-C.Investments & Distributions to Owners – reported over aperiod of time8.Investments by Ownersincreases in equity due to original investmentby owners.9.Distributions to Ownersdecreases in equity due to dividends.D.Comprehensive Income – reported overa period of time10.Comprehensive Incomeall other changes in equity except thoseresulting from Investments by Owners (#8 above) and Distributions toOwners (#9 above).Includes Net Incomeand (4) “Other Comprehensive Income” items (OCI):1)Unrealized Gains/Losses from Available for Sale Securities2)Translation Adjustments on Foreign Currency3)Pension Liability Adjustments4)Unrealized Gains/Losses from Hedging Transactions
III.SFAC #5 - ASSUMPTIONS, PRINCIPLES & CONSTRAINTSSets forthrecognition & measurementcriteria on what should be contained in financialstatements.(Includes Assumptions, Principles & Constraints)A.Assumptions:1.Economic Entity Assumptionthe owner and the business are separate& distinct entities.Furthermore, it means that all economic activities of anentity can be identified with one accountable unit(i.e. the Parent Companyis responsible for reporting the aggregated results of all of its subsidiaries)2.Going Concern Assumption-the company will continue to operate intothe foreseeable future.3.Monetary Unit Assumption-financial statements are reported in the U.S.

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Term
Summer
Professor
N/A
Tags
Accounting, Balance Sheet, Income Statement, Generally Accepted Accounting Principles, International Financial Reporting Standards

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