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Chapter 1: Question 4Q (page 22)

What is the objective of financial reporting?

Short Answer

Expert verified

Financial reportingprovides relevant information regarding the financial position and the business performance with the motive of making vital economic decisions.

Step by step solution

01

Understanding financial reporting

A process that records and interprets the company’s financial data for its users is known as financial reporting; it is one of the important parts of the business.

02

Objectives of financial reporting

Identifying the prime objectives and purpose of financial reporting
Financial reporting involves the following objectives:

  • To provide relevant data to the management for facilitating the decision-making process.
  • To provide information to the general public and shareholders, in the case of large listed companies.
  • To identify economic resources, their sources, and their utilization over a period.
  • To provide a picture of management to the stakeholders.
  • To comply with statutory requirements.

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Most popular questions from this chapter

In what way is the Securities and Exchange Commission concerned about and supportive of accounting principles and standards?

ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company’s financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.

Instructions:Answer the following questions.(b) Is the financial vice president acting improperly or immorally?

One of the major groups that has been involved in the standard-setting process is the American Institute of Certified Public Accountants. Initially, it was the primary organization that established accounting principles in the United States. Subsequently, it relinquished its power to the FASB.

Instructions

  1. Identify the two committees of the AICPA that established accounting principles prior to the establishment of the FASB.
  2. Speculate as to why these two organizations failed. In your answer, identify steps the FASB has taken to avoid failure.
  3. What is the present role of the AICPA in the rule-making environment?

What are some of the major challenges facing the accounting profession?

The Sarbanes-Oxley Act was enacted to combat fraud and curb poor reporting practices. What are some key provisions of this legislation?
See all solutions

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