Summary of Learning Objectives Page 1 of 2

Summary of Learning Objectives

1 Describe the essential characteristics of accounting.
The essential characteristics of accounting are the (1) identification, measurement, and communication of financial
information about (2) economic entities to (3) interested persons.
2 Explain how accounting makes it possible to use scarce resources more efficiently.
Accounting provides reliable, relevant, and timely information to managers, investors, and creditors so that resources are
allocated to the most efficient enterprises. Accounting also provides measurements of efficiency (profitability) and
financial soundness.
3 Explain the meaning of “stakeholder” and identify key stakeholders in financial reporting and what is at stake for
each one.
Investors, creditors, management, securities commissions, stock exchanges, analysts, credit rating agencies, auditors, and
standard setters are some of the major stakeholders. See Illustration 1-4.
4 Identify the objective of financial reporting.
According to the CICA Handbook, the objective of financial statements is to communicate information that is useful to
investors, members, contributors, creditors, and other users in making their resource allocation decisions and/or assessing
management stewardship. Consequently, financial statements give information about (a) an entity's economic resources,
obligations, and equity/net assets; (b) changes in an entity's economic resources, obligations, and equity/net assets; and
(c) the entity's economic performance.
5 Explain the notion of management bias in financial reporting.
Management bias implies that the financial statements are not neutral: in other words, the preparers of the financial
information are presenting the information in a manner that may overemphasize the positive and underemphasize the
negative.
6 Understand the importance of user needs in the financial reporting process.
The financial reporting process is based on ensuring that users receive information that is relevant to decisions. This is a
challenge as different users have different knowledge levels and needs. Management bias can make financial information
less useful.
7 Explain the need for accounting standards.
The accounting profession has tried to develop a set of standards that is generally accepted and universally practised.
Without this set of standards, each enterprise would have to develop its own standards, and readers of financial
statements would have to become familiar with every company's particular accounting and reporting practices. As a
result, it would be almost impossible to prepare statements that could be compared.
8 Identify the major entities that influence the standard-setting process and explain how they influence financial
reporting.
The CICA AcSB is the main standard-setting body in Canada. Its mandate is from the CBCA as well as provincial acts of
incorporation. Public companies are required to follow GAAP in order to access capital markets which are monitored by
provincial securities commissions. The FASB and IASB are also important as they influence Canadian standard setting.
Canada is committed to international harmonization of GAAP.
9 Explain the meaning of generally accepted accounting principles (GAAP).
Generally accepted accounting principles are either principles that have substantial authoritative support, such as the
CICA Handbook, or specific practices that have been accepted as appropriate over time because they are being applied
universally.
10 Explain the significance of professional judgement in applying GAAP.
Professional judgement plays an important role in Canadian GAAP since much of GAAP is based on general principles,
which need to be interpreted.
11 Understand issues related to ethics and financial accounting.
When performing their professional duties, financial accountants are expected to note moral considerations and to make
ethical decisions. Doing this is more difficult because no consensus has emerged among business professionals as to
what constitutes a comprehensive ethical system.
12 Identify some of the challenges facing accounting.
Some of the challenges are globalization, leading to a requirement for international harmonization of standards;
increased technology, resulting in the need for more timely information; the move to a new economy, resulting in a

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Summary of Learning Objectives Page 2 of 2

focus on measuring and reporting non-traditional assets that create value; and an increased requirement for
accountability, resulting in the creation of new measurement and reporting models that look at business reporting as a
whole.

Copyright © 2007 John Wiley & Sons, Canada, Ltd. All rights reserved.

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