Wiley CPAexcel Exam Review 2015 Focus Notes: Financial Accounting and Reporting

Module 9

Basic Concepts

Objectives of Financial Reporting

The objectives of financial reporting are to provide:

• Information that is useful to potential and existing investors, lenders, and other creditors
• Information about the reporting entity's economic resources and claims against those resources
• Changes in economic resources and claims
• Financial performance reflected by accrual accounting
• Financial performance reflected by past cash flow
• Changes in economic resources and claims not resulting from financial performance

Financial statements are designed to meet the objectives of financial reporting:

Balance Sheet	Direct Information	Financial Position
Statement of Earnings and Comprehensive Income	Direct Information	Entity Performance
Statement of Cash Flows	Direct Information	Entity Cash Flows
Financial Statements Taken as a Whole	Indirect Information	Management and Performance

Qualitative Characteristics of Accounting Information

IFRS® and U.S. Conceptual Framework as Converged

Fundamental Characteristics/Decision Usefulness	Enhancing Characteristics
Relevance	Comparability
Predictive value	Verifiability
Feedback value	Timeliness
Materiality	Understandability
Faithful Representation	Constraints
Completeness	Benefit versus costs
Neutrality
Free from error

Private Company Standards

Private company—“an entity other than a public business ...