2 Financial Reporting,Its
Conceptual Framework
Accounting School ·Zhongnan
University of Economics & Law
ntermediate
Accounting
I
中级会计学
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
1,FASB conceptual framework
FASB was given two charges:
? To develop a conceptual framework of
accounting theory.
? To establish standards (GAAP) for financial
accounting practices,
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Functions of FASB Conceptual Framework
? To guide the FASB in establishing accounting
standards.
? To provide a frame of reference for resolving
accounting questions in situations where a
standard does not exist.
? To determine the bounds for judgment in the
preparation of financial statements.
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Functions of FASB Conceptual Framework
? To increase users’ understanding of and
confidence in financial reporting.
? To enhance comparability.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Statements of Financial Accounting
Concepts issued by FASB
? Concepts Statement No,1
Objectives of Financial Reporting by Business
Enterprises
(Issue Date 11/78)
? Concepts Statement No,2
Qualitative Characteristics of Accounting
Information
(Issue Date 5/80)
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
? Concepts Statement No,3
Elements of Financial Statements of Business
Enterprises
(Issue Date 12/80,replaced by No,6 in 1985)
? Concepts Statement No,4
Objectives of Financial Reporting by Nonbusiness
Organizations
(Issue Date 12/80)
?
Continued
Statements of Financial Accounting
Concepts issued by FASB
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Statements of Financial Accounting
Concepts issued by FASB
? Concepts Statement No,5
Recognition and Measurement in Financial
Statements of Business Enterprises
(Issue Date 12/84)
? Concepts Statement No,6
Elements of Financial Statements— a replacement
of FASB Concepts Statement No,3 (incorporating
an amendment of FASB Concepts Statement No,2)
(Issue Date 12/85)
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
? Concepts Statement No,7
Using Cash Flow Information and Present Value in
Accounting Measurements
(Issue Date 2/00)
Statements of Financial Accounting
Concepts issued by FASB
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Relationship of Conceptual Framework and
Standard-Setting Process
Conceptual Framework
Objectives and ConceptsTerms
Identify goals and
purpose of accounting
Guide the selection of events to
be accounted for,the
measurement of these events,and
the means of summarizing and
communicating the information
to external users,
P
u
r
p
o
s
e
Statements of Financial
Accounting ConceptsDocuments
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Relationship of Conceptual Framework and
Standard-Setting Process
Standard SettingFrom
Objectives
and Concepts
Standards
Establish methods and
procedures for measuring,
summarizing,and
communicating financial
accounting information to
external users.Statements of
Financial
Accounting
Concepts
Statements of Financial
Accounting Standards
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Conceptual Framework Overview
Objectives
of Financial
Reporting
Qualitative
Characteristics
of Accounting
Information
Elements
of Financial
Statements
Recognition and Measurement Concepts
Assumptions Principles Constraints
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— broad
objectives
Financial reporting should
provide information that is useful
to present and potential investors
and creditors and other users in
making rational investment,
credit,and similar decisions.
Usefulness
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting
Financial reporting should
provide information that is
understandable to one who has a
reasonable knowledge of
accounting and business and who
is willing to study and analyze
the information presented.
Understandability
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting
While there are many potential
users of financial reports,the
objectives are directed primarily
toward investors and creditors.
Target Audience
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— specific
objectives
Financial reporting should
provide information that is useful
in assessing amounts,timing,
and uncertainty (risk) of
prospective cash flows.
Assessing Future Cash
Flows
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— specific
objectives
Financial reporting should also
provide information about an
enterprise’s assets,liabilities,and
owners’ equity to help investors,
creditors,and others evaluate the
financial strengths and weaknesses
of the enterprise and its liquidity
and solvency.
Evaluating Economic
Resources
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— specific
objectives
Information about enterprise
earnings,measured by accrual
accounting,generally provides a
better basis for forecasting future
performance than does information
about current cash receipts and
disbursements.
Primary Focus on Earnings
?Return on investment provides a measure of overall
company performance.
?Risk is the uncertainty of unpredictability of the
future results of a company.
?Financial flexibility is the ability of a company to
take effective actions to change the amounts and
timing of cash flows.
Types of useful information
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Continued
?Liquidity is the term used to describe how quickly
an asset can be converted into cash or a liability
paid.
?Operating capability refers to the ability of a
company to maintain a given physical level of
operation.
Types of useful information
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
3,Qualitative characteristics of
accounting information
FASB Statement of Financial Accounting
Concepts No,2 specifies qualitative
characteristics of accounting information
that accounting information should possess
in order to be most useful,Different from
China,FASB has set hierarchy of
qualitative characteristics,
Relevance Reliability
Hierarchy of Qualitative
Characteristics
Accounting Information
Benefits>Costs
Understandability
Decision Usefulness
Pervasive
Constraint User-
Specific
Quality
Primary Decision-Specific QualitiesContinued
Overall
Quality
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Ingredients of Primary Qualities
Relevance Reliability
Hierarchy of Qualitative
Characteristics
Predictive
Value
Feedback
Value
Timeli-
ness
Verifi-
ability
Representa-
tional
faithfulness
Neu-
trality
Secondary
and
Interactive
Qualities
Materiality
Comparability (including
Consistency
Threshold
for
Recognition
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Relevance,making a difference
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
?Predictive Value
Helps a decision maker predict future consequences based
on information about past transactions and events.
?Feedback Value
Helps to confirm or change a decision maker’s beliefs based
on whether the information matches what was expected.
?Timeliness
Quality of information that is provided on a timely basis.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Reliability
? Verifiability
Reported information should be based on objectively
determined facts that can be verified by other accountants
using the same measurement methods.
? Representational Faithfulness
The amounts and descriptions reported in the financial
statements should reflect the actual results of economic
transactions and events.
? Neutrality
The information should be presented in an unbiased manner;
fairness.
Free from error and represents what it claims to represent.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Comparability
? Comparability requires that similar events be
accounted for in the same manner on the
financial statements of (1) different
companies and (2) for a particular company
for different periods (consistency).
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Materiality
Is the item large
enough to influence
the decision of a user
of the information?
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
4,Accounting assumptions and
conventions
Certain assumptions and conventions
have influenced the development of
generally accepted accounting
principles,These are similar with those
of China,
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Entity
The entity assumption assumes
that a proprietorship,
partnership,or corporation’s
financial activities are
distinguished from other
financial organizations in
keeping its own financial
records and reports,
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Continuity
This assumption assumes that
the company will continue to
operate in the near future,
unless substantial evidence to
the contrary exists,This
assumption is also known as the
going-concern assumption.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Period of Time
In accordance with the period-
of-time assumption,a company
prepares financial statements at
the end of each year and
includes them its annual report,
The period-of-time assumption
is the basis for the adjusting
entry process at period-end.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Monetary Unit
This assumption states that
there must be some basis for
measuring exchange of goods
or services,Currently the
dollar is considered to be a
stable monetary unit for
preparing a company’s
financial statements.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Historical Cost
Usually,the exchange price is
retained in the accounting
records as the value of an item
until it is removed from the
records.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Realization and Recognition
Realization is the process of
converting noncash
resources and rights into
cash or rights to cash,
Recognition is the process
of formally recording and
reporting an item in the
financial statements of a
company.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Matching and Accrual Accounting
The matching principle states that
to determine the income of a
company for an accounting
period,the company computes the
total expense involved in
obtaining the revenues of the
period and relates these total
expenses to the total revenues
recorded in the period.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Conservatism
The conservatism convention
states that when alternative
accounting valuations are
equally possible,the
accountant should select the
one that is least likely to
overstate assets and income in
the current period.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
5,Elements of financial statements
Main financial statements:
? Balance Sheet
? Income statement
? Statement of Cash Flows
? Statement of Changes in Equity
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of a balance sheet
? Assets are the probable future economic
benefits obtained and controlled by a company
as a result of past transactions or events.
? Liabilities are the probable future sacrifices of
economic benefits arising from present
obligations of a company to transfer assets or
provide services in the future as a result of past
transactions or events.
? Equity is the owners’ residual interest in the net
assets of a company.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Revenues are inflows or other
enhancements of assets of a company or
settlement of its liabilities during a period
from delivering or producing goods,
rendering services,or other activities that
are the company’s ongoing major
operation,Revenues increase the equity
of a company.
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Expenses are outflows or other using up
of assets of a company or incurrence of
liabilities during a period from delivering
or producing goods,rendering services,
or carrying out other activities that are the
company’s ongoing major operation,
Expenses decrease the equity of a
company,
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Gains are increases in the equity of a
company from peripheral or incidental
transactions and from all other
transactions and other events and
circumstances affecting the company,
except those that result from revenues or
investments by owners,Gains increase
the equity of a company.
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Losses are decreases in the equity of a
company,from peripheral or incidental
transactions except those that result from
expenses or distribution to owners,
Losses decrease the equity of a company.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Statement of Cash Flows
? Operating cash flows are the flows of cash
from acquiring,selling,and delivering goods for
sale,as well as providing services.
? Investing cash flows are the flows of cash
from acquiring and selling investments,property,
plant,and equipment,as well as from lending
money and collecting on loans.
? Financing cash flows are the flows of cash to
and from the owners and long-term creditors.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Statement of Changes in
Equity
? Investments by owners are increases in
equity resulting from transfers of something
valuable to the company from other entities in
order to obtain or increase ownership interest.
? Distribution to owners are decreases in equity
of a company caused by transferring assets,
rendering services,or incurring liabilities to
owners.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
6,Comparison of accounting concepts in
China and in U.S.
Could you compare
accounting concepts in
China and in U.S.?
The End
Conceptual Framework
Accounting School ·Zhongnan
University of Economics & Law
ntermediate
Accounting
I
中级会计学
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
1,FASB conceptual framework
FASB was given two charges:
? To develop a conceptual framework of
accounting theory.
? To establish standards (GAAP) for financial
accounting practices,
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Functions of FASB Conceptual Framework
? To guide the FASB in establishing accounting
standards.
? To provide a frame of reference for resolving
accounting questions in situations where a
standard does not exist.
? To determine the bounds for judgment in the
preparation of financial statements.
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Functions of FASB Conceptual Framework
? To increase users’ understanding of and
confidence in financial reporting.
? To enhance comparability.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Statements of Financial Accounting
Concepts issued by FASB
? Concepts Statement No,1
Objectives of Financial Reporting by Business
Enterprises
(Issue Date 11/78)
? Concepts Statement No,2
Qualitative Characteristics of Accounting
Information
(Issue Date 5/80)
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
? Concepts Statement No,3
Elements of Financial Statements of Business
Enterprises
(Issue Date 12/80,replaced by No,6 in 1985)
? Concepts Statement No,4
Objectives of Financial Reporting by Nonbusiness
Organizations
(Issue Date 12/80)
?
Continued
Statements of Financial Accounting
Concepts issued by FASB
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Statements of Financial Accounting
Concepts issued by FASB
? Concepts Statement No,5
Recognition and Measurement in Financial
Statements of Business Enterprises
(Issue Date 12/84)
? Concepts Statement No,6
Elements of Financial Statements— a replacement
of FASB Concepts Statement No,3 (incorporating
an amendment of FASB Concepts Statement No,2)
(Issue Date 12/85)
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
? Concepts Statement No,7
Using Cash Flow Information and Present Value in
Accounting Measurements
(Issue Date 2/00)
Statements of Financial Accounting
Concepts issued by FASB
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Relationship of Conceptual Framework and
Standard-Setting Process
Conceptual Framework
Objectives and ConceptsTerms
Identify goals and
purpose of accounting
Guide the selection of events to
be accounted for,the
measurement of these events,and
the means of summarizing and
communicating the information
to external users,
P
u
r
p
o
s
e
Statements of Financial
Accounting ConceptsDocuments
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Relationship of Conceptual Framework and
Standard-Setting Process
Standard SettingFrom
Objectives
and Concepts
Standards
Establish methods and
procedures for measuring,
summarizing,and
communicating financial
accounting information to
external users.Statements of
Financial
Accounting
Concepts
Statements of Financial
Accounting Standards
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Conceptual Framework Overview
Objectives
of Financial
Reporting
Qualitative
Characteristics
of Accounting
Information
Elements
of Financial
Statements
Recognition and Measurement Concepts
Assumptions Principles Constraints
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— broad
objectives
Financial reporting should
provide information that is useful
to present and potential investors
and creditors and other users in
making rational investment,
credit,and similar decisions.
Usefulness
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting
Financial reporting should
provide information that is
understandable to one who has a
reasonable knowledge of
accounting and business and who
is willing to study and analyze
the information presented.
Understandability
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting
While there are many potential
users of financial reports,the
objectives are directed primarily
toward investors and creditors.
Target Audience
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— specific
objectives
Financial reporting should
provide information that is useful
in assessing amounts,timing,
and uncertainty (risk) of
prospective cash flows.
Assessing Future Cash
Flows
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— specific
objectives
Financial reporting should also
provide information about an
enterprise’s assets,liabilities,and
owners’ equity to help investors,
creditors,and others evaluate the
financial strengths and weaknesses
of the enterprise and its liquidity
and solvency.
Evaluating Economic
Resources
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Objectives of Financial Reporting— specific
objectives
Information about enterprise
earnings,measured by accrual
accounting,generally provides a
better basis for forecasting future
performance than does information
about current cash receipts and
disbursements.
Primary Focus on Earnings
?Return on investment provides a measure of overall
company performance.
?Risk is the uncertainty of unpredictability of the
future results of a company.
?Financial flexibility is the ability of a company to
take effective actions to change the amounts and
timing of cash flows.
Types of useful information
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Continued
?Liquidity is the term used to describe how quickly
an asset can be converted into cash or a liability
paid.
?Operating capability refers to the ability of a
company to maintain a given physical level of
operation.
Types of useful information
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
3,Qualitative characteristics of
accounting information
FASB Statement of Financial Accounting
Concepts No,2 specifies qualitative
characteristics of accounting information
that accounting information should possess
in order to be most useful,Different from
China,FASB has set hierarchy of
qualitative characteristics,
Relevance Reliability
Hierarchy of Qualitative
Characteristics
Accounting Information
Benefits>Costs
Understandability
Decision Usefulness
Pervasive
Constraint User-
Specific
Quality
Primary Decision-Specific QualitiesContinued
Overall
Quality
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Ingredients of Primary Qualities
Relevance Reliability
Hierarchy of Qualitative
Characteristics
Predictive
Value
Feedback
Value
Timeli-
ness
Verifi-
ability
Representa-
tional
faithfulness
Neu-
trality
Secondary
and
Interactive
Qualities
Materiality
Comparability (including
Consistency
Threshold
for
Recognition
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Relevance,making a difference
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
?Predictive Value
Helps a decision maker predict future consequences based
on information about past transactions and events.
?Feedback Value
Helps to confirm or change a decision maker’s beliefs based
on whether the information matches what was expected.
?Timeliness
Quality of information that is provided on a timely basis.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Reliability
? Verifiability
Reported information should be based on objectively
determined facts that can be verified by other accountants
using the same measurement methods.
? Representational Faithfulness
The amounts and descriptions reported in the financial
statements should reflect the actual results of economic
transactions and events.
? Neutrality
The information should be presented in an unbiased manner;
fairness.
Free from error and represents what it claims to represent.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Comparability
? Comparability requires that similar events be
accounted for in the same manner on the
financial statements of (1) different
companies and (2) for a particular company
for different periods (consistency).
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Materiality
Is the item large
enough to influence
the decision of a user
of the information?
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
4,Accounting assumptions and
conventions
Certain assumptions and conventions
have influenced the development of
generally accepted accounting
principles,These are similar with those
of China,
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Entity
The entity assumption assumes
that a proprietorship,
partnership,or corporation’s
financial activities are
distinguished from other
financial organizations in
keeping its own financial
records and reports,
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Continuity
This assumption assumes that
the company will continue to
operate in the near future,
unless substantial evidence to
the contrary exists,This
assumption is also known as the
going-concern assumption.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Period of Time
In accordance with the period-
of-time assumption,a company
prepares financial statements at
the end of each year and
includes them its annual report,
The period-of-time assumption
is the basis for the adjusting
entry process at period-end.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Monetary Unit
This assumption states that
there must be some basis for
measuring exchange of goods
or services,Currently the
dollar is considered to be a
stable monetary unit for
preparing a company’s
financial statements.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Historical Cost
Usually,the exchange price is
retained in the accounting
records as the value of an item
until it is removed from the
records.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Realization and Recognition
Realization is the process of
converting noncash
resources and rights into
cash or rights to cash,
Recognition is the process
of formally recording and
reporting an item in the
financial statements of a
company.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Matching and Accrual Accounting
The matching principle states that
to determine the income of a
company for an accounting
period,the company computes the
total expense involved in
obtaining the revenues of the
period and relates these total
expenses to the total revenues
recorded in the period.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Conservatism
The conservatism convention
states that when alternative
accounting valuations are
equally possible,the
accountant should select the
one that is least likely to
overstate assets and income in
the current period.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
5,Elements of financial statements
Main financial statements:
? Balance Sheet
? Income statement
? Statement of Cash Flows
? Statement of Changes in Equity
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of a balance sheet
? Assets are the probable future economic
benefits obtained and controlled by a company
as a result of past transactions or events.
? Liabilities are the probable future sacrifices of
economic benefits arising from present
obligations of a company to transfer assets or
provide services in the future as a result of past
transactions or events.
? Equity is the owners’ residual interest in the net
assets of a company.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Revenues are inflows or other
enhancements of assets of a company or
settlement of its liabilities during a period
from delivering or producing goods,
rendering services,or other activities that
are the company’s ongoing major
operation,Revenues increase the equity
of a company.
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Expenses are outflows or other using up
of assets of a company or incurrence of
liabilities during a period from delivering
or producing goods,rendering services,
or carrying out other activities that are the
company’s ongoing major operation,
Expenses decrease the equity of a
company,
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Gains are increases in the equity of a
company from peripheral or incidental
transactions and from all other
transactions and other events and
circumstances affecting the company,
except those that result from revenues or
investments by owners,Gains increase
the equity of a company.
Continued
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Income Statement
? Losses are decreases in the equity of a
company,from peripheral or incidental
transactions except those that result from
expenses or distribution to owners,
Losses decrease the equity of a company.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Statement of Cash Flows
? Operating cash flows are the flows of cash
from acquiring,selling,and delivering goods for
sale,as well as providing services.
? Investing cash flows are the flows of cash
from acquiring and selling investments,property,
plant,and equipment,as well as from lending
money and collecting on loans.
? Financing cash flows are the flows of cash to
and from the owners and long-term creditors.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
Elements of Statement of Changes in
Equity
? Investments by owners are increases in
equity resulting from transfers of something
valuable to the company from other entities in
order to obtain or increase ownership interest.
? Distribution to owners are decreases in equity
of a company caused by transferring assets,
rendering services,or incurring liabilities to
owners.
Intermediate Accounting 2 Financial Reporting,Its Conceptual Framework
6,Comparison of accounting concepts in
China and in U.S.
Could you compare
accounting concepts in
China and in U.S.?
The End
