Key Concepts Review

Chapter Summary

• The Conceptual Framework provides the foundation for U.S. GAAP.
• The objective of financial reporting is to provide useful information for investors, lenders, and creditors.
• The FASB establishes accounting standards through a formal due process.
• The Accounting Standards Codification is the authoritative source of nongovernmental U.S. GAAP.
• Useful financial information must be relevant and faithfully represented.
• Financial statements consist of the balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows, and accompanying notes.
• Recognition determines whether an item is reported, while measurement determines its reported amount.

The Conceptual Framework is the blueprint that guides every accounting standard.