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Concepts of Financial Reporting One of the central objectives of financial reporting is to provide information that is useful to both present and potential creditors investors and other users for decision-making purposes In order to do this the company must determine if the items in question represents a present obligation or one to be recognized it the future It is best to document the transactions during the time it is incurred By recognizing the liability in this manner investors and creditors are aware of its assets and expenses as soon as it starts to impact the firm Since the information distributed in this way is relatively current it can help user to predict future events such as cash flows or lack thereof These revisions can also help to expediently confirm past decisions giving the user confidence that no current changes are needed If any estimates length of useful life gain or loss on disposal asset etc are subject to change based on more accurate information over the useful life of the assets these changes should be reflected in the financial statement for users to see Thus users are always aware of any significant changes made by management Also when attempting to measure the value of the asset for the financial statement the present value of the item should be used Using Present value allows investors and creditors to see the current value of the firms assets and liabilities and therefore the effect they have on cash flows Thus users of financial accounting information have a relevant and reliable base on which to make their investment decisions Users will be well equipped to re-assess or formulate their opinions of the companys financial position Also any related expense must be recorded initially as a capitalized asset and then expensed in the form of depreciation or amortization over its useful life By recording the item as a capitalized asset and
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