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2 SFAC No. 8 (Created by FASB (Replaced (SFAC No. 1 and No. 2 (SFAC No. 2,…
2 SFAC No. 8
Created by FASB
Replaced
SFAC No. 1 and No. 2
SFAC No. 2
Qualitative Characteristics of Accounting Information
SFAC No. 8 Chapter 3
Qualitative Characteristics of Useful Financial Information
SFAC No. 1
now
SFAC No. 8 Chapter 1
Objective of General Purpose Financial Reporting
Objectives of Financial Reporting Business Enterprises
SFAC No. 8 Chapter 2 is not important
Cost-Benefit analysis is considered
Chapter 3 (Quality Useful Information)
Fundamental
Relevant
Predict and confirm your material value
Predictive value
can be used to predict future outcomes
Confirmatory value
can be used to confirm past prediction
Materiality
Omission or misstatement will affect decision
No specified threshhold
Makes a difference in decision
Reliable (Faithful Representation)
Completely neutral is free from error
Complete
Financial Statements and Notes
Methods of accounting and estimates
Neutral
No bias
Selecting events
Presenting events
Free from Error
No perfect accuracy
Example: Estimates
Material errors
Steps
1
Identify events
2
Identify relevant information from event
3
Determine if available and reliable
Enhancing
Compare and verify in time to understand
Comparability
Consistentcy
Verifiability
Different people reach same conclusion
Example: Auditors
Timeliness
In time for decisions
Understandability
Clear and concise
Chapter 1 (General Objectives)
To meet informational needs of primary users
Primary users (External)
Investors
Potential
Existing
Lenders
Non-primary users
Regulators
non-related public
Other Creditors
Informational needs
Resources
Claims
Management
Efficiency
Effectiveness
Governing board
Does their job