General Purpose Financial Reporting Financial Acc
Discussion: Financial Accounting Standards Board (FASB)
The
Financial Accounting Standards Board (FASB) has developed a conceptual
framework for financial accounting and reporting. FASB has issued eight
Statements of Financial Accounting Concepts (SFAC) as of August, 2013.
These statements establish objectives and fundamentals that will be the
basis for developing financial accounting and reporting standards.
The
purpose of SFAC No. 6, “Elements of Financial Statements—a replacement
of FASB Concepts Statement No. 3 (incorporating an amendment of FASB
Concepts Statement No. 2)” was to examine the characteristics that make
accounting information useful. The characteristics or qualities of
information discussed in SFAC No. 6 are the ingredients that make
information useful and are the qualities to be sought when accounting
choices are made.
SFAC
# 6 is one of a series of publications in the FASB conceptual framework
for financial accounting and reporting. Statements in the series are
intended to establish objectives and fundamentals that will be the basis
for development of financial accounting and reporting standards. The
objectives identify the goals and purposes of financial reporting. The
fundamentals are the underlying concepts of financial accounting —
concepts that guide the selection of transactions, events, and
circumstances to be accounted for; their recognition and measurement;
and the means of summarizing and communicating them to interested
parties. Concepts of that type are fundamental in the sense that other
concepts flow from them and repeated reference to them will be necessary
in establishing, interpreting, and applying accounting and reporting
standards.
Concepts
Statement No. 8 – Conceptual Framework for Financial Reporting —Chapter
1: “The Objective of General Purpose Financial Reporting,” and Chapter
3, “Qualitative Characteristics of Useful Financial Information (a
replacement of FASB Concepts Statements No. 1 and No. 2).” This Concepts
Statement, which includes two chapters of that new conceptual
framework, supersedes FASB Concepts Statements No. 1, Objectives of
Financial Reporting by Business Enterprises, and No. 2, Qualitative
Characteristics of Accounting Information. As the Board and the IASB
complete additional phases of their joint project, new chapters will be
added to this Concepts Statement, and other Concepts Statements will be
superseded.
After you have completed the required reading, respond to the following questions in your initial response:
- What
is the most important quality for accounting information as identified
in the Statement of Financial Accounting Concepts No. 6? Explain why it
is the most important. - What
is the most important quality for accounting information as identified
in the Statement of Financial Accounting Concepts No. 8? Explain why it
is the most important.
Additional possible topics to include in your discussion:
- Identify and discuss the benefits that can be expected to be derived from the FASB’s conceptual framework study.
- SFAC
No. 6 and No. 8 describe a number of key characteristics or qualities
for accounting information. Briefly discuss the importance of
understandability, relevance, and reliability for financial reporting
purposes.
Just do response each posted # 1 to 3 down below only
Posted 1
- I read the concept no. 6 which replaced numbers 2 and 3. From what I
gathered it was describing what everything was and how they should be
labeled or classified. Similarly to Sharon I came to realize that the
concept does state the objectives and fundamentals as the most
important. “The items in financial statements represent in words and
numbers certain entity resources, claims to those resources, and the
effects of transactions and other events and circumstances that result
in changes in those resources and claims.” – Fasb.org - In my words its what we use to perform our tasks in accounting.
From what I gathered within reviewing no. 8 it references the conceptual
framework to be the utmost importance which makes sense since it is in
the name of the document. How the entries would flow with
classifications and notes. Since it specifically pertains to reporting
we need to follow the directions laid out in this document. This
eliminates the chances of misleading anyone with confusing information
or even just trying to hide information by omitting. Very beneficial to
anyone that may be interested in investing.
I personally think it gives a better understanding of how the accounting
standards. Very tedious for me since I take a few re-reads to process
what I read. I now have a better insight for reporting as well.
I think just having the knowledge on doing everything proper so that it is clearly understood by all.
Posted 2
Hello everyone,
Statement
of Financial Accounting Concepts No. 6 identifies the most important
quality for accounting information are objective and fundamental that
make information useful and are the qualities to be sought when
accounting choices are made. Objectives and fundamentals are important
because the basis for development of financial accounting and reporting
standards.
Statement
of Financial Accounting Concepts No. 8 identifies the most important
quality as conceptual framework. It provides financial information about
the reporting entity that is useful to existing and potential
investors, lenders and other creditors in making decisions about
providing resources to the entity.
Posted 3
Hello Class and Professor,
No. 6 provides structure and framework for financial accounting. This
issued as a guide for the things needed to be accounted for. No. 8
Users have different needs. This board will aim at meeting all the needs
of these users.