Case Scenario:

Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with "generally accepted accounting principles." She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain the meaning of the terms she has come across related to accounting.

Using FASB Concepts Statements

• Explain how "materiality" is defined in the conceptual framework.
• The concepts statements provide several examples in which specific quantitative materiality guidelines are provided to firms. Identify at least two of these examples. Do you think materiality guidelines should be quantified? Why or why not?
• The concepts statements discuss the concept of "articulation" between financial statement elements. Briefly summarize the meaning of this term and how it relates to an entity's financial statements and why you think this is important.