BU487 Chapter Notes - Chapter 1: Broad Group, Credit Union, Accrual
Chapter 1 – Conceptual and Case Analysis Frameworks for Financial Reporting
The Conceptual Framework for Financial Reporting
GAAP principles help make f/s information relevant, reliable, understandable, and comparable
Sometimes you would want non-GAAP based statements, e.g. lender may want to receive a b/s
with assets reported at FV rather than historical cost
If a new requirement is preferred by the preparer but not accepted by users, it is unlikely to
become part of GAAP
F/S should cater to the needs of the users
Financial statement concepts describes the principles and assumptions underlying the
preparation of f/s, are important parts of GAAP because they provide the framework for the
development and issuance of other financial accounting standards
oShould include:
Objective of general purpose financial reporting
Qualitative characteristics of useful financial information
Underlying assumptions
Definition, recognition, and measurement of the elements of f/s
Professional Judgement
Judgement – the ability to make a decision in situations in which the answer is not clear cut
Judgement needs to be applied in 3 main areas
o1.) accounting policies – such as when to recognize revenue, e.g. company selling to low
credit score customers, you would recognize revenue when cash is paid, but if you sell
to high credit score, then recognize revenue when goods are delivered
o2.) accounting estimates – e.g. what is the estimated useful life of property
o3.) deciding what to disclose and how – e.g. if you are being sued and thinking about if
you should show contingent liability, but you feel like the lawsuit has no merit
Accounting Standards in Canada
GAAP for Publicly Accountable Enterprise – IFRS
oPublicly accountable enterprise (PAE) – an entity other than a not for profit organization
or a government or another entity in the public section that
i.) has issued, or is the process of issuing, debt or equity instruments that are, or
will be, outstanding and traded in a public market or…
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter 1 conceptual and case analysis frameworks for financial reporting. Gaap principles help make f/s information relevant, reliable, understandable, and comparable. Sometimes you would want non-gaap based statements, e. g. lender may want to receive a b/s with assets reported at fv rather than historical cost. If a new requirement is preferred by the preparer but not accepted by users, it is unlikely to become part of gaap. F/s should cater to the needs of the users. Financial statement concepts describes the principles and assumptions underlying the preparation of f/s, are important parts of gaap because they provide the framework for the development and issuance of other financial accounting standards: should include: Definition, recognition, and measurement of the elements of f/s. Judgement the ability to make a decision in situations in which the answer is not clear cut. Full differentiation would encompass two distinct sets of gaap.
