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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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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?

1.

To determine

Discuss the primary objectives of financial reporting.

Explanation

Financial reporting:  

Financial reporting is the procedure to communicate the information obtained from the financial statements prepared. It is necessary to disclose the data to various stakeholders as various decisions need to be taken by the stakeholders.

  • The primary objective of financial reporting is to” provide useful information about the reporting entity to its existing and the potential...

2.

To determine

Describe the level of sophistication that can be expected of the users of financial information.

3.

To determine

Indicate the stewardship responsibilities of management and also explain the role played by financial reporting with respect to stewardship.

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