Learning Objectives

• Understand the Business– LO1 Describe various organizational forms and types of business

decision makers.• Study the accounting methods

– LO2 Describe the purpose, structure, and content of the four basic financial statements.

• Evaluate the results– LO3 Explain how financial statements are used by decision

makers.– LO4 Describe factors that contribute to useful financial

information.• Review the chapter

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• Generally Accepted Accounting Principles (GAAP)– Rules of accounting approved by the Canadian

Institute of Chartered Accountants for use in Canada– Can be used by private enterprises

• International Financial Reporting Standards (IFRS)– Rules of accounting created by the Internal

Accounting Standards Board (IASB) for international use

– Must be used by publicly accountable profit-oriented enterprises

2

Useful Financial Information

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• The main goal of both IFRS and ASPE is to ensure that companies produce financial information that is useful in making decisions.

3

Canadian Generally Accepted Accounting

Principles (GAAP)

International Financial Reporting Standards (IFRS)

Publicly accountable profit-oriented enterprises

Accounting Standards for Private Enterprises (ASPE)

Private enterprises

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• Useful financial information must be:– Relevant and a faithful representation of the business– Comparable, verifiable, timely, and understandable

• Elements to be measured and reported are:– Assets, Liabilities, Shareholders’ Equity, Revenues, Expenses,

Dividends

• Concepts for measuring and reporting are:– Assumptions: Unit of Measure, Separate Entity, Going Concern,

Time Period– Principles: Cost, Revenue Recognition, Matching, Full Disclosure– Exceptions: Cost-Benefit, Materiality, Industry Practices

4LO4

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