Đang tải... (xem toàn văn)
In this chapter you explore important topics such as the FASB''s conceptual framework that serve as a foundation for a more detailed study of financial statements, the way the statement elements are measured, and the concepts underlying these measurements and related disclosures.
Chapter ENVIRONMENT AND THEORETICAL STRUCTURE OF FINANCIAL ACCOUNTING © 2013 The McGraw-Hill Companies, Inc Slide Financial Accounting Environment Providers of Financial Information Profit-oriented companies Not-for-profit entities Households External User Groups Relevant Financial Information Investors Creditors Employees Labor unions Customers Suppliers Government agencies Financial intermediaries Slide Financial Accounting Environment Relevant financial information is provided primarily through financial statements and related disclosure notes Statement of Financial Position Statement of Comprehensive Income Statement of Cash Flows Statement of Changes in Equity The Economic Environment and Financial Reporting AA sole sole proprietorship proprietorship is is owned owned by by aa single single individual individual AA partnership partnership is is owned owned by by two two or or more more individuals individuals AA corporation corporation is is owned owned by by shareholders, shareholders, frequently frequently numbering numbering in in the the tens tens of of thousands thousands in in large large corporations corporations AA highly-developed highly-developed system system of of financial financial reporting reporting is is necessary necessary to to communicate communicate financial financial information information from from aa corporation corporation to to its its many many shareholders shareholders Slide Investment-Credit Decisions ─ A Cash Flow Perspective Corporate shareholders receive cash from their investments through • Periodic dividend distributions from the corporation • The ultimate sale of the ownership shares Accounting information should help investors evaluate the amount, timing, and uncertainty of the enterprise’s future cash flows Slide Slide Cash Versus Accrual Accounting Cash Basis Accounting Revenue is recognized when cash is received Expenses are recognized when cash is paid Slide Cash Versus Accrual Accounting Cash Basis Accounting Carter Company has sales on account totaling $100,000 per year for three years Carter collected $50,000 in the first year and $125,000 in the second and third years The company prepaid $60,000 for three years’ rent in the first year Utilities are $10,000 per year, but in the first year only $5,000 was paid Payments to employees are $50,000 per year Let’s look at the cash flows Slide Cash Versus Accrual Accounting Cash Basis Accounting Cash flows in any one year may not be a predictor of future cash flows Slide Cash Versus Accrual Accounting Accrual Accounting Revenue is recognized when earned Expenses are recognized when incurred Let’s reconsider the Carter Company information Slide 10 Cash Versus Accrual Accounting Accrual Accounting ◦Revenue is recognized when earned ◦Expenses are recognized when incurred ◦ Let’s reconsider the Carter Company information Slide 17 Financial Reporting Reform in U.S As a result of numerous financial scandals, the U.S Congress passed the Public Company Accounting Reform and Investor Protection Act of 2002, 2002 commonly referred to as the Sarbanes-Oxley Act for the two congressmen who sponsored the bill Slide 18 Ethics in Accounting To be useful, accounting information must be objective and reliable Management may be under pressure to report desired results and ignore or bend existing rules Slide 19 Model for Ethical Decisions Determine the facts of the situation Identify the ethical issue and the stakeholders Identify the values related to the situation Specify the alternative courses of action Evaluate the courses of action Identify the consequences of each course of action Make your decision and take any indicated action Slide 20 The Conceptual Framework IASB conceptual framework provides structure and direction to financial accounting and reporting IASB and FASB are working together to develop a common conceptual framework through phases Slide 21 The Conceptual Framework Objectives of Financial Reporting (Phase A) Qualitative Characteristics of Accounting Information (Phase A) Elements of Financial Statements Underlying Assumptions Recognition of Elements Measurement of Elements Capital and Capital Maintenance Slide 22 Conceptual Framework Objectives To provide financial information that is useful to capital providers Qualitative Characteristics Constraints Elements Financial Statements Underlying Assumptions Recognition of Elements Measurement of Elements Capital and Capital Maintenance Continued Slide 23 Objective of financial reporting Qualitative Characteristics Understandability Underlying Assumptions Going concern Elements Fundamental Relevance Faithful representation Financial Position Assets Liabilities Equity Enhancing Comparability Verifiability Timeliness Understandability Performance Income Expenses Recognition of Elements Probability of future economic benefits Reliability of measurement Measurement of Elements Basis of measurement Capital and Capital Maintenance Concepts of capital Concepts of capital maintenance and determination of profit Financial Statements Constraints Cost effectiveness Statement of financial position Income statement Statement of comprehensive income Statement of cash flows Statement of changes in shareholder’s equity Notes and supplementary disclosures Qualitative Characteristics of Financial Reporting Information Slide 24 Slide 25 Key Constraint Cost Cost Effectiveness Effectiveness Elements of Financial Statements Slide 26 © 2013 The McGraw-Hill Companies, Inc Slide 27 Recognition and Measurement Concepts Slide 28 Measurement of Elements of Financial Statements Measurement attributes in IFRS: 1.Historical cost 2.Net realizable value 3.Current cost 4.Present value of future cash flow 5.Fair value The attribute chosen to measure a particular item should be the one that maximizes the combination of relevance and representational faithfulness © 2013 The McGraw-Hill Companies, Inc Slide 29 The Move Toward Fair Value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date Market Approaches Income Approaches Cost Approaches © 2013 The McGraw-Hill Companies, Inc Slide 30 Fair Value Hierarchy Level Inputs Most Desirable Quoted market prices in active markets for identical assets or liabilities Inputs other than quoted prices that are observable for the asset or liability These inputs include quoted prices for similar assets or liabilities in active or inactive markets and inputs that are derived principally from or corroborated by observable related market data Least Desirable Unobservable inputs that reflect the entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed on the best information available on the circumstances IFRS gives a company the option to value financial assets and liabilities at fair value © 2013 The McGraw-Hill Companies, Inc End of Chapter © 2013 The McGraw-Hill Companies, Inc ...Slide Financial Accounting Environment Providers of Financial Information Profit-oriented companies Not-for-profit entities Households External User Groups Relevant Financial Information... use of IFRS Slide 14 Structure of IASB Slide 15 Establishment of Accounting Standards Due Process Understand the nuances of the economic transactions the standards address and the views of key... numbering in in the the tens tens of of thousands thousands in in large large corporations corporations AA highly-developed highly-developed system system of of financial financial reporting reporting