For companies that are legally distinct entities, such as corporations, the reporting entity is distinct from the common equity shareholders who own the company. Why buy extra books when you can get all the homework help you need in one place? In other words, if the dollar amount of an omission or misstatement of financial information would be large enough to influence the judgment of a decision maker, then the information is material. It also means the description of the information is appropriate and the amount has been determined with a process that is accurate. Those decisions involve buying, selling, or holding equity and debt instruments and providing or settling loans and other forms of credit. All it takes is the click of a button and you will be on your way to understanding your homework and completing it faster than ever before. Whether financial information can make a difference is not dependent on whether the information has actually made a difference or will make a difference in the future.
Liquidity refers to how quickly a company can convert its assets into cash to meet short-term obligations and cover operating costs. Property, Plant, and Equipment and Intangible Assets: Acquisition 11. . Relevance Financial information is relevant when it can make a difference in the decisions made by external users in their capacity as capital providers. Financial information is more understandable when it is classified and presented clearly and concisely. Faithful Representation Financial reports represent economic transactions, events, and arrangements with words and numbers.
Consistency means accounting methods and procedures are applied in the same manner from period to period. Chegg Solution Manuals are written by vetted Chegg 18 experts, and rated by students - so you know you're getting high quality answers. Risk is the uncertainty or unpredictability of the future results of a company. Confirmatory value is sometimes referred to as feedback value. Similarly, decisions by existing and potential lenders and other creditors about providing or settling loans and other forms of credit depend on the principal and interest payments or other returns that they expect. The other accounting concepts lack significance without reference to an entity. Company A should recognize revenue at the time of sale because it has satisfied its performance obligation when it delivers the merchandise to the customer.
As a Chegg Study subscriber, you can view available interactive solutions manuals for each of your classes for one low monthly price. Financial information can have confirmatory value if it provides feedback to confirm or correct prior predictions and expectations. Faithful representation of economic phenomena occurs when the related information is complete, neutral, and free from error. It determines the appropriate period in which a company has consumed economic resources in conducting business operations. You can check your reasoning as you tackle a problem using our interactive solutions viewer. Those decisions involve buying, selling, or holding equity and debt instruments and providing or settling loans and other forms of credit.
Thus, the reporting entity assumption is so fundamental that it pervades all of accounting. Conservatism is not desirable; it is merely a prudent response to uncertainty. We expect users to not use the subreddit for financial gain, although we will remove self-promotion regardless of whether there has been personal financial gain. Equity investors include holders of equity securities, holders of partnership interests, and other equity interests. When economic effects are recognized in the current period, even though the cash flows will occur in a later period, they are usually referred to as accruals e. No need to wait for office hours or assignments to be graded to find out where you took a wrong turn.
To be a faithful representation, the information must be complete, neutral, and free from error. However, some financial information may be particularly complex. Both the variability of the return and the components of the return are important in evaluating the uncertainty of future cash flows. These financial reports can provide capital providers with information useful in identifying its financial strengths and weaknesses, and in assessing its liquidity and solvency. Information that confirms previous expectations increases the likelihood that future outcomes or results will be as previously expected.
There are four enhancing qualitative characteristics: comparability, verifiability, timeliness, and understandability. Comparability of accounting information enables users to identify and explain similarities and differences between two or more sets of economic facts. Financial information is neutral when it is not biased to attain a predetermined result or to influence behavior in a particular direction. The economic resources should be reported on an historical cost basis. Violation of the historical cost principle; the historical cost exchange price of the land should be retained in the accounting records until the land has been sold.
Under direct verification, an amount itself is verified e. The information itself does not have to be a prediction to have predictive value. Information that confirms previous expectations increases the likelihood that future outcomes or results will be as previously expected. Materiality refers 2-10 to the nature and magnitude of an omission or misstatement of accounting information that would influence the judgment of a reasonable person relying on that information. Violation of the going-concern assumption and historical cost principle. Comparability Financial information is comparable when it enables users to identify similarities and differences between two sets of economic phenomena.
Information that confirms previous expectations increases the likelihood that future outcomes or results will be as previously expected. To be verifiable, financial information does not have to be a single amount. More download links: intermediate accounting reporting and analysis answer key intermediate accounting reporting and analysis 2nd edition test bank intermediate accounting wahlen jones pagach solutions intermediate accounting reporting and analysis 1st edition solutions solution manual for intermediate accounting reporting and analysis 1st edition by wahlen intermediate accounting reporting and analysis 2nd edition pdf intermediate accounting reporting and analysis pdf 2-33. Historical cost provides evidence that independent parties have willingly agreed on the value of the items exchanged at the time of the transaction, and thus historical cost has the qualities of relevance, representational faithfulness neutrality , and verifiability. However, I can't find solutions for this edition! Capital providers also incur the costs of analysis and interpretation of the financial information. In addition, sometimes it may be necessary to explicitly disclose the degree of uncertainty in the reported financial information.