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Cma V1

The document discusses key concepts related to external financial reporting including financial statements, recognition and measurement principles, and users of financial information. It covers the main components of financial statements (balance sheet, income statement, statement of cash flows etc.), accounting principles like GAAP, accrual basis of accounting, and the purposes of financial reporting for both internal and external users of financial statements.

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Ahmed Fawzy
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363 views13 pages

Cma V1

The document discusses key concepts related to external financial reporting including financial statements, recognition and measurement principles, and users of financial information. It covers the main components of financial statements (balance sheet, income statement, statement of cash flows etc.), accounting principles like GAAP, accrual basis of accounting, and the purposes of financial reporting for both internal and external users of financial statements.

Uploaded by

Ahmed Fawzy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CMA UNIT 
1  

Financial
Planning,
Performance, and
Analytics​.

External Financial Reporting 


Decisions 
1. Financial
A. ​Balance sheet
Statements B. ​Income statement
C. ​Statement of changes in equity ​D. ​Statement B. ​Valuation of Liabilities
of cash flows ​E. ​Integrated reporting C. ​Equity transactions

2. Recognition, D. ​Revenue recognition


E. ​Income measurement
Measurement, Valuation F. ​Major Differences between US GAAP ​and
and Disclosure IFRS

A. ​Asset Valuation

Generally Accepted  
Accounting Principles (GAAP) 
Financial statements must
be prepared as per the
accounting principles that
are generally accepted in
the United States.

We should also
understand the IFRS
impact.

Users of Financial Statements 


• Staff
• Management
• Suppliers and creditors
• Investors or potential investors
• Stock markets
• Government
• Financial specialists

Internal Users 
Internal users use financial statements to 
make decisions impacting the processes 
of the business. These users include 
employees, ​management, and the 
directors.   
External Users 
External users use financial statements to 
decide whether doing business with the 
firm will be valuable.  
They include financial analysts and
advisors, stock markets, regulatory
bodies, Government, Shareholders.
The Financial Statements 
Statement of financial position (balance
sheet) Income statement
Statement of comprehensive income
Statement of changes in equity
Statement of cash flows
Financial Statement Structures 
Financial statements are the means of collaborating
financial information to external parties​.
Extra information is provided by ​financial statement
notes, supplementary information and other
disclosures​.
Information typically disclosed in notes is
important in ​understanding the financial
statements.
The notes are considered part
of the financial statements.

They explain information in the


statements ​and are an essential part
of statements prepared in
accordance with GAAP.
Fundamental Principles 
Financial statements must be ​relevant and
faithfully ​represented.​

Statements are prepared under the


going-concern assumption​, which means that
the entity is assumed to ​continue operating
indefinitely.

It is expected that the entity is not going to be


liquidated in the near future.

Financial Statements Similarities 


The components of one statement relate to those of
other ​statements. Among the comparisons are:
Ending inventories are reported in current
assets on the balance sheet and are shown in
cost of goods sold on the ​income statement.
Amortization and depreciation reported in the
income statement also are reflected in asset
balances in the balance ​sheet.
Accrual Basis of Accounting 
Financial statements are prepared under the
accrual basis of accounting​. Accrual
accounting records the effects of
transactions when they occur rather than
when their ​paid or received​.
Under the cash basis of accounting,
Income is recognized when cash is
received and expenses are recognized
when cash is paid.

Financial statements are ​not ​to be prepared


under the cash basis of accounting.

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