Presents goals and purposes of accounting (3 objectives)
Examines the characteristics that make accounting information useful.
Sets forth fundamental recognition and measurement criteria and guidance on what information should be formally incorporated into financial statements and when.
Replaces number 3 and expands its scope to include not for profit organizations.
1. Information that is useful to those making investment and credit decisions who have reasonable understanding of business and economic activities.
2. Information helpful to present and potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.
3. Information about economic resources, the claims to those resources, and changes in them.
Information that is measured and reported in a similar manner for different companies in considered comparable.
When a company applies the same accounting treatment to similar events, from period to period, the company shows consistent use of accounting standards. A company CAN change methods.
1. Economic entity
2. Going Concern
3. Monetary Unit
A company keeps its activities separate and distinct from its owners and any other business unit. Does not necessarily refer to a legal entity
Means money is the common denominator of the economic activity and provides an appropriate basis for accounting measurement and analysis.
Means a company can divide its economic activities into artificial time periods.
2. Revenue Recognition
3. Expense Recognition
4. Full Disclosure
Companies account for and report many asset and liabilities on the basis of acquisition price.
The price that would receive to sell an asset or paid to transfer a liability in an orderly transaction between marked participants at the measurement date.
If you believe the information is useful you disclose this on the financial statement
1. Cost – benefit relationship