Question
In: Accounting
Identify the 1 general objective of financial reporting. Describe the 3 specific objectives of financial reporting....
Identify the 1 general objective of financial reporting.
Describe the 3 specific objectives of financial reporting.
Explain the relationship between the objectives of financial reporting.
Explain the Financial Accounting Standards Board (FASB) conceptual framework.
Solutions
Expert Solution
One general objective of financial reporting: Objective of financial reporting is to provide information about the financial position,performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.
3 Specific objectives of financial reporting
- Provide information to investors : Investors will want to know how cash is being reinvestewd in the business and how efficiently capital is being used.
- Track cash flow:It shows how well the business is functioning and whether it can cover its debts and continue to grow.
- Analyze assets,liabilities and owner's equity:Expectations about future and availabilty of resources for future growth.
Relationship between the objectives of financial reporting :In a business everything is inter linked and one will be related to another .So if financila reporting provide information to investors so that they will be satisfied with thier investment and show more interest on investing more shares .
Financial accounting standards board(FASB) conceptual framework
The conceptual framework is a body of inter related objectives and fundamentals. The objectives identify the goals and purposes of financial reporting and the fundamentals are the underlying concepts that help achieve those objectives.
The FASB's conceptual framework helps the board in setting sound financial accounting standards and help members's of the board's constituency not only understand and apply those standards but also contribute significantly to the development.
Intended to help solve complex financial accounting or reporting problems by:
- Providing a set of common premises as a basis for discussion.
- Providing precise terminology
- Helping to ask the right questions
- Limiting areas of judgement and discretion and excluding from consideration potential solutions that are in conflict with it.
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