Management and Organizational Studies 1023A/B Lecture Notes - Lecture 2: Historical Cost, Ophanim, Free Cash Flow

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1023A/B
• Professor: Maria Ferraro

Document Summary

Lecture 2: financial statements, framework, presentation, and usage. Framework is like a constitution- a coherent system of interrelated objectives, a foundation for building a set of accounting concepts, a reference of basic accounting theory. Helps create standards for accounting, users have more understanding and confidence in financial reporting, and allows you to compare financials of different companies. Overall objective is to provide information that is useful to users and relevant to decision makers (ex. For resource allocation: resource allocation decisions include assessment of management stewardship (management"s role in maximizing shareholder value) Relevance: makes a difference in a decision (called material information), has predictive and feedback/confirmatory value. Representational faithfulness: complete, neutral, free from material error, substance over form. Comparability: reports are similar (company to company and year to year) allowing users to recognize similarities and differences. Verifiability: similar results achieved if same methods used (consensus) Understandability: allows reasonably informed users to see significance of information, provides enough information to be clear.