中南财经政法大学 中级会计学 英文版 2Financial Reporting Its Conceptual Framework.ppt

Return on investment provides a measure of overall company performance. Risk is the uncertainty of unpredictability of the future results of a company. Financial flexibility is the ability of a company to take effective actions to change the amounts and timing of cash flows. Liquidity is the term used to describe how quickly an asset can be converted into cash or a liability paid. Operating capability refers to the ability of a company to maintain a given physical level of operation. Hierarchy of Qualitative Characteristics Intermediate Accounting 2 Financial Reporting: Its Conceptual Framework Historical Cost Usually, the exchange price is retained in the accounting records as the value of an item until it is removed from the records. Intermediate Accounting 2 Financial Reporting: Its Conceptual Framework Realization and Recognition Realization is the process of converting noncash resources and rights into cash or rights to cash. Recognition is the process of formally recording and reporting an item in the financial statements of a company. Intermediate Accounting 2 Financial Reporting: Its Conceptual Framework Matching and Accrual Accounting The matching principle states that to determine the income of a company for an accounting period, the company computes the total expense involved in obtaining the revenues of the period and relates these total expenses to the total revenues recorded in the period. Intermediate Accounting 2 Financial Reporting: Its Conceptual Framework Conservatism The conservatism convention states that when alternative accounting valuations are equally possible, the accountant should select the one that is least likely to overstate assets and income in the current period. Intermediate Accounting 2 Financial Reporting: Its Conceptual Framework 5. Elements of financial statements Main financial statements: Balance Sheet Income statement Statement of Cash Flows