ACCT 201 1st Edition Lecture 7 Outline of Last Lecture I Property Plant and Equipment P P E II Accumulated Depreciation III Current Ratio Outline of Current Lecture II Securities and Exchange Commission SEC III Financial Accounting Standards Board FASB IV Generally Accepted Accounting Principles GAAP V Assumptions in Financial Reporting VI Principles of Financial Reporting Current Lecture The Securities and Exchange Commission SEC is the agency of the U S government that oversees U S financial markets and accounting standard setting bodies the Financial Accounting Standards Board FASB The board sets accounting standards in consultation with the accounting profession and the business community to determine said standards Useful information conceptual framework to serve as the basis for future accounting standards developed by the FASB Relevance Reliable Complete Consistent Primary objective Secondary objective Information that companies report must be relevant It is considered so if the information provided contains predictive value meaning it helps provide expectations about the future Reliability means it the information is faithful representation that accurately depicts what really happened And to provide a faithful representation the information must be complete free from error and uses the same accounting principles and methods from year to year Assumptions in Financial Reporting pg 65 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Monetary Unit Assumption requires that only things that can be expressed as money are allowed in the accounting records Economic Entity Assumption states that every economic entity can be separately identified and accounted for Periodicity Assumption states that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business Going Concern Assumption states that the business will remain in operation for the foreseeable future Principles in Financial ReportingMeasurement Principles GAAP generally uses one of two measurement principles the historic cost principle or the fair value principle Historic cost principle dictates that companies record assets at their cost Meaning values are recorded in your balance sheet by amount purchased instead of market value Fair value principle indicates that assets and liabilities should be reported at fair value which is the price received to sell an asset or settle a liability Full disclosure principle requires that companies disclose all circumstances and events that would make a difference to financial statement users Schaupp states that in this class we will be more concerned with historic cost and monetary unit more than the rest we ve covered in this lecture