What are the objectives of financial reporting according to FASB?
These elements provide a foundation for information that is relevant to the objective of financial reporting—namely, to provide 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.
The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB.
The primary objective of financial reporting is to provide informative and accurate financial information about a business to help stakeholders make informed decisions.
At their most basic, GASB and FASB standards are both sets of accounting standards used in the United States to: Simplify accounting and financial reporting processes. Ensure that financial reporting activities are both accurate and reliable. Help stakeholders make informed decisions.
Answer and Explanation:
According to the FASB conceptual framework, the intent of financial reporting is to provide the most useful information possible at minimal cost to various user groups.
The objective of ASC 280, Segment Reporting, is to provide information about the different types of business activities in which a reporting entity engages and the different economic environments in which it operates.
To track business cash flow – financial reporting shows different stakeholders where cash is coming and going from. To report on accounting policies – different companies have different accounting policies, financial reports allow investors and stakeholders to compare these policies.
Sol;. The most important Objective for financial reporting is to provide information useful for making decisions. …
The objective of general-purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entity.
Answer and Explanation: The major goals of the FASB ASC are to provide better support through guidelines for companies to help the U.S. GAAP to report financial statements. It helps a company to identify transactions and report it in accounts.
What is the difference between GAAP and FASB?
The generally accepted accounting principles (GAAP) are a set of accounting rules, standards, and procedures issued and frequently revised by the Financial Accounting Standards Board (FASB). Public companies in the U.S. must follow GAAP when their accountants compile their financial statements.
The main focus of the FASB is to set accounting standards and improve GAAP, ensuring that financial reporting is transparent, reliable, and relevant. It focuses on providing consistent guidelines for financial reporting by all companies, not just those issuing securities in public markets.
So, as per the conceptual framework, the main objective of financial reporting is to give the required information to its users based on their needs.
The Conceptual Framework
The FASB uses a conceptual framework, which is a set of concepts that guide financial reporting. These concepts can help ensure information is comparable and reliable to stakeholders.
Definition of Financial Reporting
The key financial reporting objectives are tracking cash flows, evaluating assets and liabilities, analyzing shareholder's equity, and measuring profits.
Answer and Explanation: The correct option is (C) Provide information on the liquidation value of an enterprise. While liquidation is one of the factors that can be deduced from financial reports, it does not stand out as one of the main objectives of financial reporting.
IFRS was designed as a standards-based approach that could be used internationally. GAAP is a rules-based system used primarily in the U.S. Although most of the world uses IFRS standards, it is still not part of the U.S. financial accounting world.
To meet that objective, the new guidance establishes the following core principle: Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Answer & Explanation
Developing and controlling the U.S. GAAP. The Financial Accounting Standards Board has the authority to establish and interpret generally accepted accounting principles (GAAP) in the United States for public and private companies, as well as for nonprofit organizations.
The FASB created the Accounting Standards Codification® (ASC) in 2009 to simplify access and provide relevant SEC guidance alongside GAAP pronouncements. The ASC groups the 800+ FASB standards by topic to reduce the amount of time and effort needed to research an issue.
What are the 4 basic principles of GAAP?
- The Cost Principle. The first principle of GAAP is 'cost'. ...
- The Revenues Principle. The second principle of GAAP is 'revenues'. ...
- The Matching Principle. The third principle of GAAP is 'matching'. ...
- The Disclosure Principle. ...
- Why are GAAP Principles important?
Responsibility for enforcement and shaping of generally accepted accounting principles (GAAP) falls to two organizations: The Financial Accounting Standards Board (FASB) and Securities and Exchange Commission (SEC). The SEC has the authority to both set and enforce accounting standards.
The FASB accomplishes its mission through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation's Board of Trustees.
Since 1973, the Financial Accounting Standards Board (FASB) has been the designated organisation in the private sector for establishing standards of financial accounting and reporting in the United States of America. Those standards govern the preparation of financial reports.
- Accurate transaction record. ...
- Asset and liability tracking. ...
- Business decision guidance. ...
- Compliance with legal regulations. ...
- Control over fraud and risk. ...
- Economic data recording. ...
- Financial budgeting and planning. ...
- Information for financing.
