Objective of Financial Reporting
What is the primary objective of financial reporting?
To provide information that is useful for making investment and credit decisions.
What are the key financial statements?
Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Shareholders' Equity.
Users of Financial Information
Who are the primary users of financial information?
Investors, creditors, regulators, and management.
Regulatory Framework and GAAP
What does GAAP stand for?
Generally Accepted Accounting Principles, which are standards and guidelines for financial reporting.
Regulatory Framework and GAAP
What is the role of the FASB?
The Financial Accounting Standards Board is the primary body responsible for establishing GAAP.
Conceptual Framework for Financial Reporting
What is the purpose of the conceptual framework for financial reporting?
To provide a foundation for accounting standards and to guide the development of future standards.
Qualitative Characteristics of Financial Information
What is meant by 'Faithful Representation'?
Information must be complete, neutral, and free from error.
Types of Financial Instruments
What defines a financial instrument?
Contracts that create a financial asset for one entity and a financial liability or equity instrument for another.
Types of Financial Instruments
What are the types of financial instruments?
Debt Instruments (like bonds and loans) and Equity Instruments (like stocks and options).
What are the elements of financial statements?
Assets, Liabilities, Equity, Revenues, Expenses.
Qualitative Characteristics of Financial Information
What does 'Relevance' mean in financial reporting?
Information must be capable of making a difference in decisions.
Measurement Bases in Financial Reporting
What is Historical Cost?
The original transaction value.
Recognition and Measurement of Financial Instruments
What factors influence subsequent measurement of financial instruments?
It depends on classification (amortized cost vs. fair value).
Challenges in Financial Measurement
What are the challenges in financial measurement?
Subjectivity and estimation in determining fair values, and the impact of measurement on financial statements.
Recognition and Measurement of Financial Instruments
What are the disclosure requirements for financial instruments?
Information about risks, fair value measurements, and credit quality.
Qualitative Characteristics of Financial Information
What are the qualitative characteristics of financial information?
Relevance and Faithful Representation.
Measurement Bases in Financial Reporting
What is Fair Value?
The current market value of an asset.
Measurement Bases in Financial Reporting
What are the different measurement bases in financial reporting?
Historical Cost, Fair Value, Net Realizable Value, Present Value.
