【正文】 bsidiaries are merged for accounting and reporting purposes. Periodicity Going Concern Moary Unit Economic Entity 239 Measurement Principle – The most monly used measurements are based on historical cost and fair value. Issues: ? Historical cost provides a reliable benchmark for measuring historical trends. ? Fair value information may be more useful. ? Recently the FASB has taken the step of giving panies the option to use fair value as the basis for measurement of financial assets and financial liabilities. ? Reporting of fair value information is increasing. Third Level: Basic Principles LO 7 Explain the application of the basic principles of accounting. 240 Third Level: Basic Principles LO 7 Explain the application of the basic principles of accounting. Illustration 25 Timing of Revenue Recognition Revenue Recognition generally occurs (1) when realized or realizable and (2) when earned. Exceptions: 241 Expense Recognition “Let the expense follow the revenues.” Third Level: Basic Principles LO 7 Explain the application of the basic principles of accounting. Illustration 26 Expense Recognition 242 Third Level: Basic Principles LO 7 Explain the application of the basic principles of accounting. Full Disclosure – providing information that is of sufficient importance to influence the judgment and decisions of an informed user. Provided through: ? Financial Statements ? Notes to the Financial Statements ? Supplementary information 243 Third Level: Basic Principles LO 7 Explain the application of the basic principles of accounting. Brief Exercise 28: Identify which basic principle of accounting is best described in each item below. (a) KC Corporation reports revenue in its ine statement when it is earned instead of when the cash is collected. (b) Yahoo, Inc. recognizes depreciation expense for a machine over the 2year period during which that machine helps the pany earn revenue. (c) Oracle Corporation reports information about pending lawsuits in the notes to its financial statements. (d) Eastman Kodak Company reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair market value is greater. Revenue Recognition Expense Recognition Full Disclosure Measurement 244 Cost Constraint – cost of providing information must be weighed against the benefits that can be derived from using it. Industry Practice the peculiar nature of some industries and business concerns sometimes requires departure from basic accounting theory. Third Level: Constraints LO 8 Describe the impact that constraints have on reporting accounting information. 245 Brief Exercise 210: What accounting constraints are illustrated by the items below? (a) KC, Inc. reports agricultural crops on its balance sheet at market value. (b) Rafael Corporation discloses fair value information on its loans because it already gathers this information internally. (c) Willis Company does not disclose any information in the notes to the financial statements unless the value of the information to users exceeds the expense of gathering it. (d) A brokerdealer records all assets and liabilities at fair value. Industry Practice Third Level: Constraints Cost Constraint LO 8 Cost Constraint Industry Practice 246 Illustration 27 Conceptual Framework for Financial Reporting Summary of the Structure 247 RELEVANT FACTS ? In 2020, the IASB and FASB pleted the first phase of a jointly created conceptual framework. In this first phase, they agreed on the objective of financial reporting and a mon set of desired qualitative characteristics. ? The existing conceptual frameworks underlying GAAP and IFRS are very similar. ? The converged framework should be a single document, unlike the two conceptual frameworks that presently exist。 Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information containe