Solutions Manual
Intermediate Accounting
IFRS 5th Edition By Donald
Kieso, Jerry Weygandt,
Terry Warfield
Understand the financial reporting environment. - ✔✔correctanswers✔✔✔a. Companies
provide four primary financial statements of financial reporting: 1) the balance sheet, 2)
the income statement, 3) the statement of cash flows, and 4) the statement of owners'
or stockholders' equity.
b. The Objective of General-Purpose financial reporting -- to provide financial
information about the reporting entity that is useful to present and potential equity
investors, lenders, and other creditors in decisions about providing resources to the
entity through equity investments and loans or other forms or credit. Information that is
decision-useful to investors may also be helpful to other users of financial reporting who
are not investors.
c. For financial reporting to be successful, a set of standards that are generally
accepted and universally practiced are required to be followed.
Identify the major policy-setting bodies and their role in the standard-setting process. -
✔✔correctanswers✔✔✔a. The Securities and Exchange Commission (SEC) -- a federal
agency which is capable of prescribing, in whatever detail it desires, the accounting
standards to be employed by companies that fall within its jurisdiction.
, b. The American Institute of Certified Public Accountants (AICPA) -- issues standards
through its committee on Accounting Procedure and Accounting Principles Board.
c. The Financial Accounting Standards Board (FASB) -- establishes new and improves
upon current standards of financial accounting and reporting for the guidance and
education of the public.
Explain the meaning of generally accepted accounting principles (GAAP) and the role of
the Codification for GAAP. - ✔✔correctanswers✔✔✔a. Generally Accepted Accounting
Standards -- the principles that have substantial authoritative support, such as FASB
standards, interpretations, and Staff Positions, APB opinions and interpretations, AICPA
Accounting Research Bulletins, and other authoritative pronouncements. b. The role of
the Codification is to simplify user access to all authoritative U.S. GAAP. The
Codification also changes the way GAAP is documented, presented, and updated.
Describe the major challenges in the financial reporting environment. -
✔✔correctanswers✔✔✔a. The first major challenge is that user groups may want
particular economic events accounted for or reported in a particular way, and they fight
hard to get what they want. Especially, they target the FASB to influence changes in
existing GAAP and in the development of new rules.
b. The second major challenge is that financial reports fail to provide: 1) some key
performance measures widely use by management, 2) forward-looking information need
by investors and creditors, 3) sufficient information on a company's soft assets
(intangibles), 4) real-time financial information, and 5) easy-to-comprehend information.
c. Lastly, financial accountants are called on for moral discernment and ethical decision-
making. Decisions sometimes are difficult because a public consensus has not emerged
to formulate a comprehensive ethical system that provides guidelines in making ethical
judgments.
Differentiate between financial accounting and managerial accounting. -
✔✔correctanswers✔✔✔Financial accounting is the process that culminates in the
preparation of financial reports on the enterprise for use by both internal and external
parties, whereas Managerial accounting is the process of simply identifying, measuring,
analyzing, and communicating financial information needed by management to plan,
control, and evaluate a company's operations.
Differentiate between "financial statements" and "financial reporting." -
✔✔correctanswers✔✔✔Financial statements are the principle means through which a
company communicates its financial information to those outside it. Such statements
provide a company's history quantified in money terms. Financial reporting is actually a
means of improving upon and better providing useful information than provide in formal
financial statements.
How does accounting help the capital allocation process? -
✔✔correctanswers✔✔✔Accounting helps the capital allocation process by accurately
measuring performance so that the correct managers and companies are able to attract
Intermediate Accounting
IFRS 5th Edition By Donald
Kieso, Jerry Weygandt,
Terry Warfield
Understand the financial reporting environment. - ✔✔correctanswers✔✔✔a. Companies
provide four primary financial statements of financial reporting: 1) the balance sheet, 2)
the income statement, 3) the statement of cash flows, and 4) the statement of owners'
or stockholders' equity.
b. The Objective of General-Purpose financial reporting -- to provide financial
information about the reporting entity that is useful to present and potential equity
investors, lenders, and other creditors in decisions about providing resources to the
entity through equity investments and loans or other forms or credit. Information that is
decision-useful to investors may also be helpful to other users of financial reporting who
are not investors.
c. For financial reporting to be successful, a set of standards that are generally
accepted and universally practiced are required to be followed.
Identify the major policy-setting bodies and their role in the standard-setting process. -
✔✔correctanswers✔✔✔a. The Securities and Exchange Commission (SEC) -- a federal
agency which is capable of prescribing, in whatever detail it desires, the accounting
standards to be employed by companies that fall within its jurisdiction.
, b. The American Institute of Certified Public Accountants (AICPA) -- issues standards
through its committee on Accounting Procedure and Accounting Principles Board.
c. The Financial Accounting Standards Board (FASB) -- establishes new and improves
upon current standards of financial accounting and reporting for the guidance and
education of the public.
Explain the meaning of generally accepted accounting principles (GAAP) and the role of
the Codification for GAAP. - ✔✔correctanswers✔✔✔a. Generally Accepted Accounting
Standards -- the principles that have substantial authoritative support, such as FASB
standards, interpretations, and Staff Positions, APB opinions and interpretations, AICPA
Accounting Research Bulletins, and other authoritative pronouncements. b. The role of
the Codification is to simplify user access to all authoritative U.S. GAAP. The
Codification also changes the way GAAP is documented, presented, and updated.
Describe the major challenges in the financial reporting environment. -
✔✔correctanswers✔✔✔a. The first major challenge is that user groups may want
particular economic events accounted for or reported in a particular way, and they fight
hard to get what they want. Especially, they target the FASB to influence changes in
existing GAAP and in the development of new rules.
b. The second major challenge is that financial reports fail to provide: 1) some key
performance measures widely use by management, 2) forward-looking information need
by investors and creditors, 3) sufficient information on a company's soft assets
(intangibles), 4) real-time financial information, and 5) easy-to-comprehend information.
c. Lastly, financial accountants are called on for moral discernment and ethical decision-
making. Decisions sometimes are difficult because a public consensus has not emerged
to formulate a comprehensive ethical system that provides guidelines in making ethical
judgments.
Differentiate between financial accounting and managerial accounting. -
✔✔correctanswers✔✔✔Financial accounting is the process that culminates in the
preparation of financial reports on the enterprise for use by both internal and external
parties, whereas Managerial accounting is the process of simply identifying, measuring,
analyzing, and communicating financial information needed by management to plan,
control, and evaluate a company's operations.
Differentiate between "financial statements" and "financial reporting." -
✔✔correctanswers✔✔✔Financial statements are the principle means through which a
company communicates its financial information to those outside it. Such statements
provide a company's history quantified in money terms. Financial reporting is actually a
means of improving upon and better providing useful information than provide in formal
financial statements.
How does accounting help the capital allocation process? -
✔✔correctanswers✔✔✔Accounting helps the capital allocation process by accurately
measuring performance so that the correct managers and companies are able to attract
