Presented below are four statements which you are to identify as true or false. 1. The objective of financial statements emphasizes a stewardship approach for reporting financial information. 2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners' or stockholders' equity. 3. Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards. 4. The objective of financial reporting uses an entity rather than a proprietary appr

Question

Business

Phoebe Acevedo

28 April, 18:20

Presented below are four statements which you are to identify as true or false. 1. The objective of financial statements emphasizes a stewardship approach for reporting financial information. 2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners' or stockholders' equity. 3. Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards. 4. The objective of financial reporting uses an entity rather than a proprietary appr

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Efrain Howell · Answer 1

1. False.

2. False

3. False.

4. True.

Explanation:

1. The objective of financial statements emphasizes a stewardship approach for reporting financial information.

False. Financial statements do not only follow the stewardship approach, but also the decision-usefulness approach. Both are equally important, the former gives an account of the management of resources by those in charge of them (who are different from the owners, because they do not own the resources, but simply administer them); while the latter provides information to those relevant actors for the company in order to guide decision making processes.

2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners' or stockholders' equity.

False. Financial reporting is a set of financial results that are presented to the public. Although the financial results include the balance sheet, the income statement, the statement of cash flows and the statement of owners 'or stockholders' equity, financial reporting is much broader and its real purpose is guiding decision making by strategic actors for the company as investors and creditors.

3. Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards.

False. Both interpretations and standards follow the same due process. It should not be thought that because the interpretations are shorter, their content is lower. An interpretation of the FASB (Financial Accounting Standards Board) is an official publication of this entity and its purpose is to indicate how a previously-issued standard should be applied. Despite having this pedagogical function, interpretations are an integral part of the established accountanting principles.

4. The objective of financial reporting uses an entity rather than a proprietary approach.

True. Financial reporting is oriented to the general public and specifically to those actors that are strategic for the financial support of the company. If the proprietary approach were followed, the target audience of the financial reports would be, as the name suggests, the proprietors of the company.