U.S. GAAP

Generally Accepted Accounting Principles
in the United States

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Study

Qualitative Characteristics
of Accounting Information
(SFAC No. 2)

U.S. GAAP by Topic

Statements of Financial Accounting Standards (SFAS)

SFAC No. 2

Statement of Financial Accounting Concepts (SFAC) No. 2
        a. Qualitative Characteristics of Accounting Information
        b. Issued in May 1980

A Hierarchy of Accounting Qualities

Most important characteristics of information
--> Usefulness for Decision Making

User-Specific Qualities
                a. Understandability

             Information is not useful
             --> if it is not understandable.

Primary Decision-Specific Qualities
                a. Relevance
             --> Capacity to make a
                   difference in a decision

                b. Reliability
             --> Information is reasonably
                   free from error and bias.

Ingredients of Relevance
                a. Predictive value
             --> increases the likelihood of
                   forecasting the outcome of events.

                b. Feedback value
             --> enables users to confirm or correct
                   prior expectations.

                c. Timeliness
             --> makes information available
                   before it loses its capacity
                   to influence decisions.

Ingredients of Reliability
                a. Verifiability
             --> ability to ensure that
                   information represents
                   what it purports to represent

                b. Representational faithfulness
             --> information represents
                   what it purports to represent

                c. Neutrality
             --> absence of bias
                   to attain a predetermined result

Secondary and Interactive Qualities
                a. Comparability
             --> enables users
                   to identify similarities and differences

                b. Consistency
             --> Conformity from period to period

Threshold for Recognition
                a. Materiality
             --> Magnitude that influences the judgment
                   of a reasonable person
                   who relies on the information

Pervasive Constraint
--> Benefits > Costs

Other Statements of Financial Accounting Concepts (SFAC)

SFAC No.	Title	Issue Date
1	Objectives of Financial Reporting by Business Enterprises	November 1978
2	Qualitative Characteristics of Accounting Information	May 1980
3	Superseded by SFAC No. 6
4	Objectives of Financial Reporting by Nonbusiness Organizations	December 1980
5	Recognition and Measurement in Financial Statements of Business Enterprises	December 1984
6	Elements of Financial Statements	December 1985
7	Using Cash Flow Information and Present Value in Accounting Measurements	February 2000

Other Accounting Topics

Inventory Valuation Methods

Depreciation Methods

Revenue Recognition Principle

Accrual Basis vs. Cash Basis Accounting

Basics of Journal Entries

Ratios for Financial Statement Analysis

U.S. GAAP by Topic

Statements of Financial Accounting Standards (SFAS)

	Wiley GAAP 2008: Interpretation and Application of Generally Accepted Accounting Principles 2008 Paperback Edition CD-Rom Edition Book & CD-Rom Edition
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