Brenda So is the accountant for a small private company called Micro Construction Ltd. She has just finished preparing the financial statements for the company's first year end, which falls on December 31, 2021. Brenda's boss, Melinda Jo, who is the chief executive officer (CEO), has asked her to make three changes to the financial statements:

1 Remove an expense and its related liability pertaining to the payment of damages arising from a lawsuit that Brenda recorded. Melinda believes that, although it is highly likely that Micro will have to pay for these damages, the company should record nothing in the financial statements nor disclose any details in the notes to the financial statements because the parties will not reach a final agreement about the exact amount of these damages until next month.

2 Just prior to the end of the year, Micro signed a contract to build a new arena for the city for a fixed fee of $80 million. As long as the company can build the facility for less than this amount, it will generate net income. Because the value of the contract is fixed and the city has always paid its bills on time, Melinda wants to record the revenue for this contract in the current year because that was when the company signed the contract.

3 The company has a chequing account that the bank allows to go into an overdraft (negative) position. When the balance falls into an overdraft, the bank begins to charge interest on that amount as if it were a bank loan, which in essence it is. Since there is no due date on such a balance, Melinda would like to report the loan as a non-current liability.

Instructions

using excel format

a.	What is the objective of financial reporting? Do Melinda's suggestions for what the company should report on the financial statements meet the objective of
	financial reporting? Explain why or why not for each suggestion.
b.	For each of the items above, identify:
	1	the qualitative charactertistic of financial reporting involved.
	2	whether the proposed changes enhance or diminsh the qualitative charactertics of the team's financial statements. Make sure to explain the reason for
		your conclusion.