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第一题
Q:what`s the most important quality for accounting information as identified in statement of financial accounting concepts NO.2 and explain why
A：Relevance and reliability are the most important quality for accounting information as identified in FASC No.2.As stated in FASC No.2,"the qualities that distinguish better(more useful) information from inferior(less useful) information are primarily the qualities of relevance and reliability, with some other characteristics that those qualities imply."
(Explain why)
To be relevant, accounting information must be capable of making a difference in a decision. If certain information has no bearing on a decision, it is irrelevant to that decision.Relavant information helps users make predictions about the ultimate outcome of past,present and future events; it also helps users to comfirm or correct prior expectations ,i.e.,it has feedback value.
To be reliability,accounting information must be to some extent verifiable,faithful representaion and is reasonably free of error and bias.Reliabilty is necessity for individuals as who have neither the time nor the expertise to evaluate the factual content of the information.
Q:what`s the most important quality for accounting information as identified in statement of financial accounting concepts NO.2 and explain why
A：Relevance and reliability are the most important quality for accounting information as identified in FASC No.2.As stated in FASC No.2,"the qualities that distinguish better(more useful) information from inferior(less useful) information are primarily the qualities of relevance and reliability, with some other characteristics that those qualities imply."
(Explain why)
To be relevant, accounting information must be capable of making a difference in a decision. If certain information has no bearing on a decision, it is irrelevant to that decision.Relavant information helps users make predictions about the ultimate outcome of past,present and future events; it also helps users to comfirm or correct prior expectations ,i.e.,it has feedback value.
To be reliability,accounting information must be to some extent verifiable,faithful representaion and is reasonably free of error and bias.Reliabilty is necessity for individuals as who have neither the time nor the expertise to evaluate the factual content of the information.
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Q：briefly discuss the importance of any three of accounting information`s qualities for financial reporting purposes
A：For financial reporting pursoses, accounting information about an enterprise is more useful if it can be compared with similar information(comparability) and with similar information about the same enterprise at other points in time(consistency).Besids, the quality of information should permit reasonably informed users to perceive its significance.This quality is named "understandablity".
Comparablity is important.Information that has been measured and reported in a similar manner for diffent enterprises if considered comparable, so that users can identify the real similarities in economic phenomena because these difference and similarities have not been obscured by the use of noncomparable accounting methods.
Consistency is important.When an entity applies the same accounting treatment to similar events,from period to period,the entity is considered to be consistent in its use of accounting standards.It does not mean that companies cannot switch from one method of accounting to another.Companies can change accounting methods but these changes are restricted to situations in which it can be demonstrated that the newly adopted method is preferable to the old.Then the nature and effect of the accounting change, as well as the justification for it,must be disclosed in the financial statements for the period in which the change is made.Thus,financial reports are more useful for it can be compared with prior reports for the same entity.
Understandablity is important because it is the linkage between users of finacial reports and the decisions they make.To illustrate the importance of this linkage,assume that IBM Corp. issues a three-months' earning report that shows interim earnings way down.The report provide relevant and reliable information for decision making purposes. Some users,upon the information, decide to sell their stocks while others do not because they don't understand the reports' content and significance.Then they will be surprised when IBM declares a smaller year-end dividend and the value of the stock declines.Thus,although the information presented was highly relevant and reliable, it was useless to those who did not understand it.
(The end)
A：For financial reporting pursoses, accounting information about an enterprise is more useful if it can be compared with similar information(comparability) and with similar information about the same enterprise at other points in time(consistency).Besids, the quality of information should permit reasonably informed users to perceive its significance.This quality is named "understandablity".
Comparablity is important.Information that has been measured and reported in a similar manner for diffent enterprises if considered comparable, so that users can identify the real similarities in economic phenomena because these difference and similarities have not been obscured by the use of noncomparable accounting methods.
Consistency is important.When an entity applies the same accounting treatment to similar events,from period to period,the entity is considered to be consistent in its use of accounting standards.It does not mean that companies cannot switch from one method of accounting to another.Companies can change accounting methods but these changes are restricted to situations in which it can be demonstrated that the newly adopted method is preferable to the old.Then the nature and effect of the accounting change, as well as the justification for it,must be disclosed in the financial statements for the period in which the change is made.Thus,financial reports are more useful for it can be compared with prior reports for the same entity.
Understandablity is important because it is the linkage between users of finacial reports and the decisions they make.To illustrate the importance of this linkage,assume that IBM Corp. issues a three-months' earning report that shows interim earnings way down.The report provide relevant and reliable information for decision making purposes. Some users,upon the information, decide to sell their stocks while others do not because they don't understand the reports' content and significance.Then they will be surprised when IBM declares a smaller year-end dividend and the value of the stock declines.Thus,although the information presented was highly relevant and reliable, it was useless to those who did not understand it.
(The end)
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