ACCT1511 topic 1
Q1: Objective of Financial Reporting (From Kieso et al. (2010)
Homer Winslow and Jane Alexander are discussing various aspects of the “conceptual framework”. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolving accounting controversies. He believes that the
Framework provides such broad guidelines that it would be impossible to apply the objective(s) to present day reporting problems. Jane concedes this point, but indicates that objective(s) are still needed to provide a starting point for the standard setter in helping to improve financial reporting.
a) Indicate the basic objective established in the Conceptual Framework.
The objective of the general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity or debt instruments, and providing or settling loans and other forms of credit. (OB 2 in the Framework)
DO NOT WRITE OUTSIDE THE BOX
b) What do you think is the meaning of Jane’s statement that the standards setters need a starting point to resolve accounting controversies about how to improve financial reporting? Suggest points that are acceptable (of course, alternative answer that are valid and argued well is acceptable):
*The objective in the framework is broad, but it forms the foundation of the rest of the framework as well as all the more comprehensive guidance in all other accounting standards.
The reporting entity concept, the qualitative characteristics of, and the constraints on, useful financial information, elements of financial statements, recognition, measurement, presentation and disclosure – flows logically from the objective.
* The underlying objective and the framework set out the concepts that underlie the preparation
and
Homer Winslow and Jane Alexander are discussing various aspects of the “conceptual framework”. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolving accounting controversies. He believes that the
Framework provides such broad guidelines that it would be impossible to apply the objective(s) to present day reporting problems. Jane concedes this point, but indicates that objective(s) are still needed to provide a starting point for the standard setter in helping to improve financial reporting.
a) Indicate the basic objective established in the Conceptual Framework.
The objective of the general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity or debt instruments, and providing or settling loans and other forms of credit. (OB 2 in the Framework)
DO NOT WRITE OUTSIDE THE BOX
b) What do you think is the meaning of Jane’s statement that the standards setters need a starting point to resolve accounting controversies about how to improve financial reporting? Suggest points that are acceptable (of course, alternative answer that are valid and argued well is acceptable):
*The objective in the framework is broad, but it forms the foundation of the rest of the framework as well as all the more comprehensive guidance in all other accounting standards.
The reporting entity concept, the qualitative characteristics of, and the constraints on, useful financial information, elements of financial statements, recognition, measurement, presentation and disclosure – flows logically from the objective.
* The underlying objective and the framework set out the concepts that underlie the preparation
and