E2-1 (Usefulness, Objective of Financial Reporting) Indicate whether the followi

Question

E2-1 (Usefulness, Objective of Financial Reporting) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.

(a) Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements.

(b) General-purpose financial reports are most useful to company insiders in making strategic business decisions.

(c) Accounting standards based on individual conceptual frameworks generally will result in consistent and comparable accounting reports.

(d) Capital providers are the only users who benefit from general-purpose financial reporting.

(e) Accounting reports should be developed so that users without knowledge of economics and business can become informed about the financial results of a company.

(f) The objective of financial reporting is the foundation from which the other aspects of the framework logically result.

Explanation / Answer

a) True

b) False, because general purpose financial reports are most useful to the creditors and investors in making investment decision.

c) False, accounting standards based on individual conceptual framework will lead to different conclusions about identical or similar issues than it did previously .

d) False, General purpose financial reporting provides financial reporting information to a wide variety of users, including shareholders, creditors, suppliers, employees, and regulators.

e) False, It is assumed that users of the reports have a reasonable knowledge of business and economic activities.

f) True

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