CFAS: Module 1 - Development of Financial Reporting Framework and Standard Setting Body

CFAS: Module 1 - Development of Financial Reporting Framework and Standard Setting Body financial accounting - The process that culminates in the preparation of financial reports on the enterprise for the use by both internal and external parties. financial statements - Principal means through which a company communicates its financial information to those outside it. statement of financial position, income statement or statement of comprehensive income, statement of cash flows, statement of changes in equity - the financial statements most frequently provided general-purpose financial reporting - Its objective is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity. general purpose financial statements - Provide at the least cost the most useful information possible to a wide variety of users. equity investors and creditors - Are the primary user groups and have the most critical and immediate needs for information in the financial statements. They need this information to assess a company's ability to generate net cash inflows and to understand the management's ability to protect and enhance the assets of a company. entity perspective - Means that the company is viewed as being separated and distinct from its investors. Therefore, the assets of the company belong to the company, not a specific creditor or shareholder. proprietary perspective - Is focused only on the needs of the shareholder. It is not considered appropriate. decision usefulness - Means that information contained in the financial statements should help investors assess the amounts, timing, and uncertainty of prospective cash inflows from dividends or interest, and the proceeds from the sale, redemption, or maturity of securities or loans. comparability - A single, widely accepted set of high-quality accounting standards is a necessity to ensure adequate ______________. a.) A single set of high-quality accounting standards established by a single standard setting body b.) Consistency in application and interpretation c.) Common disclosures d.) Common high-quality auditing standards and practices e.) A common approach to regulatory review and enforcement f.) Education and training of market participants g.) Common delivery systems h.) A common approach to corporate governance and legal frameworks around the world - In order to ensure comparability, the following elements must be present: financial accounting - Focused on the recording of business transactions and the periodic preparation of reports on financial position and results of operations. Financial accountants accord importance to existing accounting standards. management accounting - A profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of organization's strategy.