01.01. Qualitative Accounting Information Criteria

Home > Preview

The flashcards below were created by user COC2 on FreezingBlue Flashcards.


  1. Purposes of accounting
    • track and organize all the activities that affect an organization financially
    • provide information useful for decision making
  2. 5 basic assertions of accounting
    • financial information is complete
    • valued correctly
    • exists
    • belongs to the company
    • is properly classified, described, and disclosed
  3. Accounting information criteria
    • understandability
    • relevance
    • reliability
    • comparability and consistency
    • lack of bias
    • cost-benefit effectiveness
  4. Accounting Criteria - Understandability
    • should be readily understandable
    • both for intended users and uses
    • must be transparent, intelligible, and clearly disclosed
  5. Accounting Criteria - Relevance
    • should help its users make decisions
    • info must be timely, have predictive value, and provide useful feedback about previously made decisions
  6. Accounting Criteria - Reliability
    • representational faithfulness: info represents what it claims to represent
    • verifiability: should be able to recreate data
    • completeness: should not omit any material fact or consideration
    • neutrality: info can be used for economic decision making w/o regards to how it may affect economic, political, or social behavior
  7. Accounting Criteria - Comparability and Consistency
    must allow for comparisons between time periods and among entities
  8. Accounting Criteria - Lack of Bias
    • useful only if users understands the bias
    • bias is consistently applied across time periods / firms / industries
    • users can adjust the reported results to reflect their own desired bias
  9. Bias vs SOPs
    • ASOP: actuary should be aware that a discounted reserve is an inadequate estimate of economic value unless appropriate risk margins are included
    • CIA: requires both PV discounting and provisions for adverse deviation (risk margin)
  10. Accounting - Cost-benefit effectiveness
    cost of producing info should be reasonable in relation to the expected benefit of the information
  11. Other accounting considerations
    • relevance vs reliability
    • neutrality vs reliability
  12. Lack of bias and reliability
    • requires conservatism since uncertain asset can not be relied upon
    • may lead to delayed recognition of some assets

Card Set Information

Author:
 COC2
ID:
 201591
Filename:
 01.01. Qualitative Accounting Information Criteria
Updated:
2013-02-19 01:20:23
Tags:
accounting
Folders:

Description:
Qualitative Accounting Information Criteria
Show Answers:

What would you like to do?

Home > Flashcards > Print Preview