Conceptual Framework: FASB
Whether a decision or explanation is useful to a reporting document, the preparer should consider whether it is Relevant and a Faithful Representation. Relevance is generally has Confirmatory Value and/or Predictive Value.
Minor possessions of an company are so low in value that they are grouped into larger categories, such as pens, paper, and staples would not be individually listed by listed under the category office supplies, because their aggregate value is more important for reporting, and giving the reader a better understanding of the Confirmatory Value of the assets, while a million dollar piece of equipment may be listed individually do to is greater value to the company and its efforts to generating revenues.
When a report is generated under neutral biases, and free from errors, the product of that work is given greater credibility. Remember that the creditability of a company is one of its greatest resources to gain additional assets, such as investments and external financing. Many reporting efforts require oversight and review by various entities for accuracy in reporting.
Enhancing Qualitative Characteristics:
Comparability: ability to see differences and similarities between two different business activities
Verifiability: implies a consensus amongst different measurers
Timeliness: information is available enough to allow utilization of the information in decision making process
Understandability: the ability for the user to understand the information as it pertains to their decision making efforts
Underlying Assumptions: GAAP
Economic Assumption
Monetary Unit Assumption
Periodicity Assumption
Going Concern Assumption
