Financial Reporting and Analysis(7e)课件 - Ch1

Analytical tool Management report card
Early warning signal Basis for prediction Measure of accountability
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Accounting is Not an Exact Science
Some financial statement items (e.g., cash) are measured with a high degree of precision and reliability.
Many items (e.g., product warranty liabilities) are judgmental and uncertain in their measurement because they are derived from estimates of future events.
Copyright © 2018 by McGraw-Hill Education.
Economics of Accounting Information
The financial statements of business enterprises serve two key functions:
Financial statements are the first and often the best source of information about a company’s past performance, current health, and prospects for the future.
Learning Objectives
After studying this chapter, you will understand:
1. Why financial statements are valuable sources of information about companies.
2. How financial reporting addresses the information demands of current or potential stakeholders allocating resources and monitoring manager activities.
Investors and others should not accept the numbers in financial statements at face value. Financial statements readers must: Understand financial reporting standards. Recognize that management can shape information. Distinguish between reliable and judgmental information.
the accounting practices of U.S. companies.
Copyright © 2018 by McGraw-Hill Education.
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Why Financial Statements are Important
Without adequate information, investors cannot properly judge the opportunities and risks of investment alternatives.
Financial statements and accompanying disclosures provide information about a company’s economic wealth and changes in that wealth.
Financial statements can be used for various purposes:
Employees • Company-sponsored pension plans
Lenders and • Lending decisions Suppliers •ቤተ መጻሕፍቲ ባይዱCovenant compliance
Customers
• Seller’s health • Repeat purchases • Warranties & support
Government & Regulators
• Mandatory reporting • Taxing authorities • Regulated industries
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Disclosure Incentives and the Supply of Financial Information
SEC Regulation Fair Disclosure (“Reg FD”) is designed to:
Prevent selective disclosure by companies to market professionals and certain shareholders
Level the playing field between individual investors and institutional investors by limiting what management can say in private conversations and meetings
SUPPLY
DEMAND
Financial statements are demanded because of their value as a source of information about company performance, financial condition, and resource stewardship.
Disclosure costs • Information collection, processing, and dissemination costs • Competitive disadvantage costs • Litigation costs • Political costs
Companies that confront different financial reporting costs and benefits are likely to choose different accounting and reporting practices.
3. How the supply of financial information is influenced by the costs of producing and disseminating it and by the benefits it provides..
4. How accounting rules are established, and why those management can shape the financial information communicated to outsiders and still be within those rules.
Voluntary disclosure is guided by cost/benefit considerations.
Disclosure benefits • Obtaining capital more cheaply • Better terms from suppliers • Avoid the “lemon” problem
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Regulation Fair Disclosure
Companies frequently communicate financial information that exceeds the minimum financial reporting requirements
5. Why financial reporting philosophies and detailed accounting practices sometimes differ across countries.
6. Why International Financial Reporting Standards (IFRS) influence
The Economic and Institutional Setting for Financial Reporting
Revsine/Collins/Johnson/Mittelstaedt/Soffer: Chapter 1
Copyright © 2018 by McGraw-Hill Education.
Copyright © 2018 by McGraw-Hill Education.
The supply of financial information is guided by the costs of producing and disseminating it and the benefits it will provide to the company.
Financial statement users (“analysts”) have diverse information needs because they face different decisions or use different approaches to make the same decision.