Hierarchy of Qualitative Financial Reporting: Characteristics

4 acc ch. 1 Hierarchy of Qualitative Financial Reporting: characteristics Decision Usefulness Relevant Faithful Representation ( predictive / confirmatory valve ) ( completeness ) ( material / meaning ful ) ( neutrality ) ( free from error ) I comparibility/ ( verifiability) ( understandability ) (timeliness ) consistency ) Cost effectiveness - increased decision usefulness exceeds the cost of providing that information ( Rey constraint ) Annual Report - most common source of financial information for external decision makers . contains : - management discussion and analysis ( MD &A ) - report from an independent auditor - financial statements . balance sheet - financial position at the end of the period ( snapshot ) A= L + SE . income statement - performance during the period net income = revenue - experises . statement of retained earnings - show changes in equity beg. R. E. + N. 1. - dividends = end R.E. . statement of cash flow - shows changes in cash amounts / liquidity operating . cash flow + - investing CF r- financing CF = and cash Book value us Market value total stockholder's equity as reported on the balance sheet is the book value . market value : # of shares * market share price