Framework For Financial Statement Analysis - Assignment Point
Framework For Financial Statement Analysis
Subject: Finance | Topics:

Framework For Financial Statement Analysis:

Need For Financial Statement Analysis:

•In an ideal world, the user of financial statements could focus only on the bottom lines of financial reporting: net income and stockholders equity.
• The financial reporting system is not perfect. Economic events & accounting entries do not correspond precisely; they diverge across the dimensions of timing, recognition & measurement.
• Economic events and accounting recognition of those events frequently take place at different times.
•Example- the recognition of capital gain and losses only upon sale in most cases.
•Long  – lived assets are written down, most of the time, in the Fiscal Period of management’s choice.
Need For Financial Statement Analysis:
•In an ideal world, the user of financial statements could focus only on the bottom lines of financial reporting: net income and stockholders equity.
• The financial reporting system is not perfect. Economic events & accounting entries do not correspond precisely; they diverge across the dimensions of timing, recognition & measurement.
• Economic events and accounting recognition of those events frequently take place at different times.
•Example- the recognition of capital gain and losses only upon sale in most cases.
•Long  – lived assets are written down, most of the time, in the Fiscal Period of management’s choice.
Need For Financial Statement Analysis, cont..
• Many Economic events do not receive accounting recognition at all.  Some contracts such as leases and hedging activities.
•Generally Accepted Accounting Principles (GAAP) permit economic events that do receive accounting recognition to be recognized in different ways by different financial statement prepares.
• Financial reports often contain supplementary data that, although not included in the statements themselves, help the financial statement users to interpret the statements or to adjust measures of corporate performance to make them more comparable.
• Information from outside the financial reporting process can be used to make financial data more useful.
Framework

 

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