Questions On Financial Reporting And Corporate Reporting

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Hey, hey, hey! Chapter 2 Conceptual Framework. Now this chapter has very little in the way of numbers so if you’re a true accountant who wants to get his visor out, maybe his arms bands, pocket protector, it might not be the chapter for you. But you better know this stuff. We’re going to see it time again cause the concepts we’re going to come back to them. We’re going to repeat them throughout this course in 312 you’ll see them come up a time again. So make sure you get this chapter down and we will refer back to these concepts. As we go through the course have fun!
Slide 2
Here’s a pyramid talking about the concepts related to financial reporting. For profit financial reporting, business applies to not financial reporting also. Let’s
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Look at these three companies Sears, JCPenney, and Ford. If you think about investing or buying bonds. Becoming a creditor in other words of these companies and you were comparing two of them, which two companies would be the easiest to compare? Sears and JCPenney because they’re in the same industry. They would have similar underline transactions, several types of assets, probably same seasonality versus Ford. So it’s easier to compare Sears and JCPenney than it is Sears with Ford or JCPenney with Ford. Comparability is the question then. Comparability means comparability across companies at the same time or one company year to year. Sometimes call consistency. That’s a subset of comparability. The purchase price of a 20 year old machinery is still in the books is this okay? Well it’s not for relevance necessarily. But it is US GAAP. US GAAP says we keep the purchase price of that equipment on the books. And depreciate it. So the book value is the original cost less than the accumulative depreciation. The total annual depreciation since we’ve had it. This is called measurement. And the companies expenses cost of tools that would be used for production assembly, hold on wait a minute. Wait a minute. This can’t be right. The company expenses the cost of tools will be used for product assembly, you read the chapter. I hope you did.
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