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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What is the cost constraint, and how does it affect financial reporting?

To determine

Explain the term cost constraint and also specify the manner by which it affects the financial reporting.

Explanation

Accounting Information:

Accounting information must not only be relevant and faithful but they must pass the economic test by satisfying benefit> cost constraint. The accounting information which is disclosed by the management is beneficial to the decision makers for making decision but they are very costly to prepare and use

  • Identifying financial information that must be disclosed in financial reports, the qualitative characteristics of accounting information are bound by the pervasive constraint known as cost constraint.
  • Accounting information must not only be relevant and faithful but they must pass the economic test by satisfying benefit> cost constraint. The accounting information which is disclosed by the management is beneficial to the decision makers for making decision but they are very costly to prepare and use...

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