What ience between financial statements and financial repoting CA1-s (objective

Question

What ience between financial statements and financial repoting CA1-s (objective of Financial Reporting) by a lange manufacturing company. She has been rent Preliminary Views published by the Financial Accounting Standards ceptual framework, and she believes that these concept Preliminary Views. She has prepared a rough draft of the asked by Jose Martinez, controller, to prepare the company's response to a Board (FASB). Sepan knows that the FASB has a Karen Sepan, a recent graduate of the local state university, is presently em a con- the company's response to the statements could be used to support response citing the objective of financial reporting a) Identify the objective of financial reporting b) Describe the level of sophistication expected of the users of financial information by l reporting continuing -s Acounting Numbers and the Environment) Hardly a day goes byrchase incentives, poor lending without an article appearing on the fallout from the financial crisis of 2008. An overheated real estate market, fueled by m practices, and securitization through high-risk, mortgage-backed securities, led to a near collapst bej a consequence, many have argued that if the financial institutions had been required to rep investments) at fair value instead of cost, large losses would have been reported earlier. This wou the problems in the mortgage markets and therefore minimized the losses to U.S taxpayers. of global capital markets. As oans (and loan-backed ld have signaled regulators to o their l to Us arlier. Tortthor Explain how reported accounting numbers might affect an individual's perceptions and actions. Cite two examples CA1-7 WRITING (Need for GAAP) Some argue that having various organizations establish accounting principles is wasteful considered important. In addition, if an investor wants additional information, the investor could contact the company and pay and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it receive the additional information desired Instructions omment on the appropriateness of this viewpoint. merican Institute of Certified Public Accountants, Initially, it was the primary organization that es A1-8 (AICPA's Role in Rule-Making) One of the major groups that has been involved in the standard-setting process is les in the United States Subsequently, it relinquished its power to the FASB tablished accounting prin-

Explanation / Answer

CA 1-5:

Part a:

The objective of financial reporting is to provide the stakeholders of business and non-business entities with important financial information to help them assess the financial performance of such organizations and their financial positions as on particular date. Thus, the main objective of financial reporting is to report the financial performance and position of business and non-business organizations to the stakeholders.

Part b:

The users of financial information are generally the stakeholders of an organization. The users of financial information must have the basis knowledge of accounting to understand the financial statements. This is necessary to correctly assess the state of financial position and the performance of an organization from financial statements.

CA 1-6:

Reported accounting numbers in financial statements have huge impact on the perception of the individuals about the state of financial affairs of an organization as well as its performance. Thus, the accounting numbers must be reported correctly and efficiently in the financial statements. For example an organization if shows huge amount of profit from its operations in the profit and loss account then the investors of the organization would feel secure and safe as they will expect huge amount of return on their investments. Similarly if the balance sheet of an organization shows that an organization has huge amount of debt fund as compared to the amount of equity the stakeholders would be quite anxious of the financial state of the organization.       

CA 1-7:

The investors and other stakeholders of an organization are well within their rights to have the financial information about the organization to assess the financial state and position of an organization. To ask them to pay for financial information of the organizations in which they have invested and have their interests associated with is disrespectful to them. Apart from that there must be some parity in financial reporting to allow the organization to only disclose financial information as per their discretion and to ask for payment from them to provide additional information is not correct. There must be a standard financial reporting format that should be followed by the organizations to provide the investors as well as other stakeholders of an organization with necessary information about the organization to assess the financial performance and position of an organization as on a particular date.

CA 1-8: There was no instruction for this question hence, it is not possible to answer this question.

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