成都理工大學會計英語7

ACCOUNTING會計英語主講教師：朱靖AccountingPrinciplesAccounting,ThirdEditionChapter7ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.Describethebasicobjectivesoffinancialreporting.Discussthequalitativecharacteristicsofaccountinginformationandelementsoffinancialstatements.Identifythebasicassumptionsusedbyaccountants.Identifythebasicprinciplesofaccounting.Identifythetwoconstraintsinaccounting.Understandandanalyzeclassifiedfinancialstatements.Explaintheaccountingprinciplesusedininternationaloperations.StudyObjectivesAccountingPrinciplesMonetaryunitEconomicentityTimeperiodGoingconcernTheConceptualFrameworkofAccountingAssumptionsPrinciplesConstraintsinAccountingStatementPresentationandAnalysisObjectivesofreportingQualitativecharacteristicsElementsoffinancialstatementsOperatingguidelinesRevenuerecognitionMatchingFulldisclosureCostMaterialityConservatismSummaryofconceptualframeworkClassifiedbalancesheetClassifiedincomestatementAnalyzingfinancialstatementsAninternationalperspectiveVarioususersneedfinancialinformationTheaccountingprofessionhasattemptedtodevelopasetofstandardsthataregenerallyacceptedanduniversallypracticed.FinancialStatementsBalanceSheetIncomeStatementStatementofRetainedEarningsStatementofCashFlowsNoteDisclosureGenerallyAcceptedAccountingPrinciples(GAAP)TheConceptualFrameworkofAccountingSO1ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.SecuritiesandExchangeCommission(SEC)//TheConceptualFrameworkofAccountingOrganizationsInvolvedinStandardSetting:FinancialAccountingStandardsBoard(FASB)SO1ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.ConceptualFramework-“…aconstitution,acoherentsystemofinterrelatedobjectivesandfundamentals.”FASB’sconceptualframeworkconsistsofthefollowing:Objectivesoffinancialreporting.Qualitativecharacteristicsofaccountinginformation.Elementsoffinancialstatements.Operatingguidelines(assumptions,principles,and constraints).TheConceptualFrameworkofAccountingSO1ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.Review:

Aconceptualframeworkunderlyingfinancialaccountingisimportantbecauseitcanleadtoconsistentstandardsanditprescribesthenature,function,andlimitsoffinancialaccountingandfinancialstatements.ConceptualFrameworkTrueSO1ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.FalseTrueReview:

Aconceptualframeworkunderlyingfinancialaccountingisnecessarybecausefutureaccountingpracticeproblemscanbesolvedbyreferencetotheconceptualframeworkandaformalstandard-settingbodywillnotbenecessary.ConceptualFrameworkSO1ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.TrueFalseFalseWhataretheStatementsofFinancialAccountingConceptsintendedtoestablish?Generallyacceptedaccountingprinciplesinfinancialreportingbybusinessenterprises.Themeaningof“Presentfairlyinaccordancewithgenerallyacceptedaccountingprinciples.”Theobjectivesandconceptsforuseindevelopingstandardsoffinancialaccountingandreporting.Thehierarchyofsourcesofgenerallyacceptedaccountingprinciples.ConceptualFrameworkReview:(CPAadapted)SO1ExplainthemeaningofGAAPandidentifythekeyitemsoftheconceptualframework.Toprovideinformationthatisusefultothosemakinginvestmentandcreditdecisions.Helpfulinassessingfuturecashflows.Identifytheeconomicresources(assets),theclaimstothoseresources(liabilities),andthechangesinthoseresourcesandclaims.ConceptualFrameworkObjectivesofFinancialReportingSO2Describethebasicobjectivesoffinancialreporting.AccordingtotheFASBconceptualframework,theobjectivesoffinancialreportingforbusinessenterprisesarebasedon?GenerallyacceptedaccountingprinciplesReportingonmanagement’sstewardship.Theneedforconservatism.Theneedsoftheusersoftheinformation.ConceptualFramework(CPAadapted)Review:SO2Describethebasicobjectivesoffinancialreporting.Question:Howdoesacompanychooseanacceptableaccountingmethod,theamountandtypesofinformationtodisclose,andtheformatinwhichtopresentit?SO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.Answer:Bydeterminingwhichalternativeprovidesthemostusefulinformationfordecision-makingpurposes(decisionusefulness).ConceptualFrameworkRelevance

–makingadifferenceinadecision.PredictivevalueFeedbackvalueTimelinessReliabilityVerifiableRepresentationalfaithfulnessNeutral-freeoferrorandbiasQualitativeCharacteristicsConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.Comparability

–Informationthatismeasuredandreportedinasimilarmannerfordifferentcompaniesisconsideredcomparable.Consistency-Whenacompanyappliesthesameaccountingtreatmenttosimilareventsfromperiodtoperiod.QualitativeCharacteristicsConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.Review: Relevanceandreliabilityarethetwoprimaryqualitiesthatmakeaccountinginformationusefulfordecisionmaking. Tobereliable,accountinginformationmustbecapableofmakingadifferenceinadecision.ConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.TrueFalseTrueTrueFalseFalseReview:

Adherencetotheconceptofconsistencyrequiresthatthesameaccountingprinciplesbeappliedtosimilartransactionsforaminimumoffiveyearsbeforeanychangeinprincipleisadopted.ConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.TrueFalseFalseRevenueExpensesGainsLossesAssetsLiabilitiesEquity“MomentinTime”“PeriodofTime”ElementsofFinancialStatementsConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.Illustration:Identifytheelementorelementsassociatedwithitemsbelow.(a)Obligationtotransferresourcesarisingfromapasttransaction.(b) Itemscharacterizedbyfutureeconomicbenefit.(c) Arisesfromincomestatementactivitiesthatconstitutetheentity’songoingmajororcentraloperations.Elements(a)AssetsLiabilitiesEquityRevenueExpenses(b)(c)(c)ConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.AssetsLiabilitiesEquityRevenueExpenses(d) Residualinterestinthenetassetsoftheenterprise.(e) Increasesassetsthroughsaleofproduct.Elements(a)(b)(c)(c)(d)(e)Illustration:Identifytheelementorelementsassociatedwithitemsbelow.ConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.Review:AccordingtotheFASBconceptualframework,anentity’srevenuemayresultfromAdecreaseinanassetfromprimaryoperations.Anincreaseinanassetfromincidentaltransactions.Anincreaseinaliabilityfromincidentaltransactions.Adecreaseinaliabilityfromprimaryoperations.(CPAadapted)ConceptualFrameworkSO3Discussthequalitativecharacteristicsofaccounting informationandelementsoffinancialstatements.OperatingGuidelinesConceptualFrameworkAssumptionsprovideafoundationfortheaccountingprocess.MonetaryUnitEconomicEntityPeriodicityGoingConcernSO4Identifythebasicassumptionsusedbyaccountants.AssumptionsOnlytransactiondatacapableofbeingexpressedintermsofmoneyshouldbeincludedintheaccountingrecordsoftheeconomicentity.SO4Identifythebasicassumptionsusedbyaccountants.AssumptionsMonetaryUnitEconomiceventscanbeidentifiedwithaparticularunitofaccountability.SO4Identifythebasicassumptionsusedbyaccountants.AssumptionsEconomicEntitySO4Identifythebasicassumptionsusedbyaccountants.AssumptionsTimePeriodTheeconomiclifeofabusinesscanbedividedintoartificialtimeperiods.SO4Identifythebasicassumptionsusedbyaccountants.AssumptionsGoingConcernTheenterprisewillcontinueinoperationlongenoughtocarryoutitsexistingobjectives.Illustration:

Identifywhichbasicassumptionofaccountingisbestdescribedineachitembelow.TheeconomicactivitiesofFedExCorporationaredividedinto12-monthperiodsforthepurposeofissuingannualreports.(b) SolectronCorporation,Inc.doesnotadjustamountsinitsfinancialstatementsfortheeffectsofinflation.(c) WalgreenCo.reportscurrentandnoncurrentclassificationsinitsbalancesheet.(d) TheeconomicactivitiesofGeneralElectricanditssubsidiariesaremergedforaccountingandreportingpurposes.PeriodicityGoingConcernMonetaryUnitEconomicEntityAssumptionsSO4Identifythebasicassumptionsusedbyaccountants.Accountingprinciplesdictatehoweconomiceventsshouldberecordedandreported.RevenueRecognitionMatching(ExpenseRecognition)FullDisclosureCostSO5Identifythebasicprinciplesofaccounting.PrinciplesRevenueRecognition

-companiesshouldrecognizerevenueintheaccountingperiodinwhichitisearned.SO5Identifythebasicprinciplesofaccounting.PrinciplesMatching-efforts(expenses)shouldbematchedwithaccomplishment(revenues)wheneveritisreasonableandpracticabletodoso.“Lettheexpensefollowtherevenues.”Illustration7-4

ExpenseRecognitionSO5Identifythebasicprinciplesofaccounting.PrinciplesIllustrationBasicPrinciplesMatchingPrincipleSO5Identifythebasicprinciplesofaccounting.PrinciplesFullDisclosure–Providedthroughfinancialstatements,notestothefinancialstatements,andsupplementaryinformation.SO5Identifythebasicprinciplesofaccounting.PrinciplesIllustrationBasicPrinciplesCostPrinciple

–theprice,establishedbytheexchangetransaction,isthe“cost”.SO5Identifythebasicprinciplesofaccounting.PrinciplesIllustrationBasicPrinciplesIllustration:Identifywhichbasicprincipleofaccountingisbestdescribedineachitembelow.(a)NorfolkSouthernCorporationreportsrevenueinitsincomestatementwhenitisearnedinsteadofwhenthecashiscollected.(b)Yahoo,Inc.recognizesdepreciationexpenseforamachineoverthe2-yearperiodduringwhichthatmachinehelpsthecompanyearnrevenue.(c)OracleCorporationreportsinformationaboutpendinglawsuitsinthenotestoitsfinancialstatements.(d)EastmanKodakCompanyreportslandonitsbalancesheetattheamountpaidtoacquireit,eventhoughtheestimatedfairmarketvalueisgreater.RevenueRecognitionMatchingFullDisclosureCostSO5Identifythebasicprinciplesofaccounting.PrinciplesConstraintspermitacompanytomodifygenerallyacceptedaccountingprincipleswithoutreducingtheusefulnessofthereportedinformation.MaterialityConservatismConstraintsinAccountingSO6Identifythetwoconstraintsinaccounting.Materiality

-anitemismaterialifitsinclusionoromissionwouldinfluenceorchangethejudgmentofareasonableperson.Illustration

ConstraintsConstraintsinAccountingSO6Identifythetwoconstraintsinaccounting.Conservatism

-Whenindoubt,choosethemethodthatwillbeleastlikelytooverstateassetsandincome.Illustration

ConstraintsConstraintsinAccountingSO6Identifythetwoconstraintsinaccounting.IllustrationWhataccountingconstraintsareillustratedbytheitemsbelow?(a)CrimsonTideCorporationdoesnotaccrueacontingentlawsuitgainof$650,000.(b)SunDevilCorporationexpensesthecostofwastebasketsintheyeartheyareacquired.ConservatismMaterialityConstraintsinAccountingSO6Identifythetwoconstraintsinaccounting.SummaryofConceptualFrameworkClassifiedBalanceSheetStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Illustration

StandardclassificationClassifiedBalanceSheetStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Illustration

ProprietorshipbalancesheetAproprietorship,thebalancesheetusestheterm“Owner’sequity”insteadof“Stockholders’equity”ClassifiedBalanceSheetStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Illustration

PartnershipbalancesheetInapartnership,eachpartnerhasaseparatecapitalaccount.ClassifiedIncomeStatementStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Amultiple-stepincomestatementgenerallyincludesthefollowing.SalesrevenueCostofgoodsOperatingOtherrevenuesandgainsOtherexpensesandlossesTwoadditionalitemsareincometaxexpenseandearningspershare.ClassifiedIncomeStatementStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Illustration7-11

IncometaxesClassifiedIncomeStatementNetIncomeEarningsPerShare=NumberofCommonSharesOutstandingStatementPresentationandAnalysisIndicatesthenetincomeearnedbyeachshareofoutstandingcommonstock.SO7Understandandanalyzeclassifiedfinancialstatements.AnalyzingFinancialStatementsStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Threemajorcharacteristicsaregenerallyused:Liquidity,Profitability,andSolvency.LiquidityStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Thisratiomeansthatcurrentassetsaremorethantwotimesgreaterthancurrentliabilities.StatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.Workingcapitalprovidessomeindicationofthecompany’sabilitytomeetitsexistingcurrentobligations.LiquidityStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.ProfitabilityStatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.ProfitMarginPercentagemeasuresthepercentageofeachdollarofsalesthatresultsinnetincome.ProfitabilityProfitabilityratiosmeasuretheincomeoroperatingsuccessofacompanyforagivenperiodoftime.StatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.ReturnonAssetsisanoverallmeasureofprofitability.ProfitabilityReturnonCommonEquityshowsthepercentageofnetincomeearnedforeachdollarofowners’investment.StatementPresentationandAnalysisSO7Understandandanalyzeclassifiedfinancialstatements.DebttoTotalAssetsmeasuresthepercentageoftotalassetsthatcreditors,asopposedtostockholders,provide.SolvencySolvencymeasurestheabilityofanenterprisetosurviveoveralongperiodoftime.StatementPresentationandAnalysisSO8Explaintheaccountingprinciplesusedininternationaloperations.AnInternationalPerspectiveTherearefewrecognizedworldwideaccountingst