Textbook Problem

Objectives, Users, and Stewardship

The owners of CSC Inc., a privately held company, are considering a public offering of the company’s common stock as a means of acquiring additional funds. Prior to making a decision about a public offering, the owners want to have a lengthy conversation with you, CSC’s chief financial officer. You have already informed the owners of the reporting requirements of the Securities and Exchange Commission, including the necessity for audited financial statements. Now the owners wish to discuss with you the objectives of financial reporting, the sophistication of users of financial information, and the stewardship responsibilities of management, all of which are addressed in Statement of Financial Accounting Concepts No. 8, Chapter 1, “The Objective of General Purpose Financial Reporting.”

Required:

1. 1. How will you discuss the primary objectives of financial reporting?
2. 2. How will you describe the level of sophistication that can be expected of the users of financial information?
3. 3. How will you explain the stewardship responsibilities of management? What role does financial reporting play with respect to stewardship?