Intermediate Accounting, 15th Edition

CHAPTER 1 Financial Accounting and Accounting Standards

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Identify the major financial statements and other means of financial reporting.
2. Explain how accounting assists in the efficient use of scarce resources.
3. Identify the objective of financial reporting.
4. Explain the need for accounting standards.
5. Identify the major policy-setting bodies and their role in the standard-setting process.
6. Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP.
7. Describe the impact of user groups on the rule-making process.
8. Describe some of the challenges facing financial reporting.
9. Understand issues related to ethics and financial accounting.

We Can Do Better

A recent report says it best: “Accounting information is central to the functioning of international capital markets and to managing small businesses, conducting effective government, understanding business processes, and … how economic decisions are made. … Across the globe, a common characteristic of economies that flourish is the presence of reliable accounting information.”

Many in the United States take pride in our system of financial reporting as being the most robust and transparent in the world. But most would also comment that we can do better, particularly in light of the many accounting scandals that have occurred at companies like AIG, WorldCom, and Lehman Brothers, and the financial crisis of 2008. ...