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Chapter 1: Question 4Q (page 22)

What is the objective of financial reporting?

Short Answer

Expert verified

Financial reportingprovides relevant information regarding the financial position and the business performance with the motive of making vital economic decisions.

Step by step solution

01

Understanding financial reporting

A process that records and interprets the company鈥檚 financial data for its users is known as financial reporting; it is one of the important parts of the business.

02

Objectives of financial reporting

Identifying the prime objectives and purpose of financial reporting
Financial reporting involves the following objectives:

  • To provide relevant data to the management for facilitating the decision-making process.
  • To provide information to the general public and shareholders, in the case of large listed companies.
  • To identify economic resources, their sources, and their utilization over a period.
  • To provide a picture of management to the stakeholders.
  • To comply with statutory requirements.

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Most popular questions from this chapter

Question: What is the benefit of a single set of high-quality accounting standards?

For what purposes did the AICPA create the Accounting Principles Board?

Presented below are comments made in the financial press.InstructionsPrepare responses to the requirements in each item.

a) Rep. John Dingell, at one time the ranking Democrat on the House Commerce Committee, threw his support behind the FASB鈥檚 controversial derivatives accounting standard and encouraged the FASB to adopt the rule promptly. Indicate why a member of Congress might feel obligated to comment on his proposed FASB standard.

b) In a strongly worded letter to Senator Lauch Faircloth (R-NC) and House Banking Committee Chairman Jim Leach (R-IA), the American Institute of Certified Public Accountants (AICPA) cautioned against government intervention in the accounting standard-setting process, warning that it had the potential of jeopardizing U.S. capital markets. Explain how government intervention could possibly affect capital markets adversely.

GROUPWORK (GAAP Terminology) Wayne Rogers, an administrator at a major university, recently said, 鈥淚鈥檝e got some CDs in my IRA, which I set up to beat the IRS.鈥� As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms.

Instructions

Presented below is a list of common accounting acronyms. Identify the term for which each acronym stands, and provide a brief definition of each term.

(a) AICPA (e) FAF (l) FASB

(b) CAP (f) FASAC (j) SEC

(c) EITF (g) GAAP (k) IASB

(d) APB (h) CPA

Briefly describe the FASB/ IASB convergence process and the principles that guide their convergence efforts.
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