FINANCIAL STATEMENTS AND FINANCIAL REPORTING * Accounting and capital allocation * Objective * Need to develop standard
PARTIES INVOLVED IN STANDARD-SETTING * Securities and Exchange * Commission * American Institute of CPAs * Financial Accounting * Standards Board * Changing role of the AICPA
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES * FASB Codification
ISSUES IN FINANCIAL REPORTING * Political environment * Expectations gap * Financial reporting * challenges * International accounting * standards * Ethics
The essential characteristics of accounting are
(1) The identification, measurement, and communication of financial information about
(2) Economic entities to
(3) Interested parties.
Financial accounting is the process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties. Users of these financial reports include investors, creditors, managers, unions, and government agencies.
Managerial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaluates a company’s operations.
The financial statements most frequently provided are: (1) The balance sheet,
(2) The income statement,
(3) The statement of cash flows, and
(4) The statement of owners’ or stockholders’ equity.
Capital Allocation Process:
Financial Reporting- The financial information a company provides to help users with capital allocation decisions about the company
Users (present and potential- Investors and creditors use financial reports to make their capital allocation decisions
Capital Allocation -The process of determining how and at what cost money is allocated among competing interests.
The objective of general-purpose financial reporting is to provide financial information about the reporting entity that