BRIDGE TO THE PROFESSION
Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with “generally accepted accounting principles.” She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain the meaning of terms she has come across related to accounting.
Go to http://www.fasb.org and access the FASB Concepts Statements and respond to the following items. (Provide paragraph citations.) When you have accessed the documents, you can use the search tool in your Internet browser.
(a) How is “materiality” defined in the conceptual framework?
(b) The concepts statements provide several examples in which specific quantitative materiality guidelines are provided to firms. Identity at least two of these examples Do you think the materiality guidelines should be quantified? Why or why not?
(c) The concepts statements discuss the concept of “articulation” between financial statement elements. Briefly summarize the meaning of this term and how it relates to an entity’s financial statements.