Continuing Case Solution
Chapter 2
Memorandum
To: Eric Conner and Phil Martin, CM Corporation
From: L. Harbach
Re: Elements of FASB Conceptual Framework
Date: January 4, 2013
(a) The objective of financial reporting is to provide financial information that is
information can make a difference in a decision. In order to meet this criterion,
faithful representation (numbers and narrative)
matches reality (i.e. that its factual content is accurate). In order to faithfully
represent reality, financial accounting information must be complete. In other
Both relevance and faithful representation are considered fundamental qualities
of financial information as described in Statement of Accounting Concepts No. 8.
Ideally both characteristics should be present in financial statement information.
Continuing Case Solution
can be verified from purchase documents; and this value is considered objective.
This value is not strong with respect to relevance because it usually does not
reflect the fair value of the asset.
(c) The enhancing qualities of financial information are comparability, verifiability,
Information is verifiable when independent measurers, using the same methods,
obtain similar results. External audits help provide assurance as to the
verifiability of financial statement information.