The Financial Accounting Standards Board (FASB) has been working on a conceptual framework for financial accounting and reporting and has issued seven Statements of Financial Accounting Concepts (SFAC).These SFACs are intended to set forth objectives and fundamentals that will be the basis for developing financial accounting and reporting standards. The objectives identify the goals and purpose of financial reporting. The fundamentals are the underlying concepts of financial accounting-concepts that guide the selection of transactions, events and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties.

The purpose of SFAC No. 2. Qualitative Characteristics of Accounting Information, is to examine the characteristics that make accounting information useful. The characteristics or qualities of information discussed in SFAC No. 2 are the ingredients that make information useful and the qualities to be sought when accounting choices are made.

Required:

a) Discuss the 4 goals and 4 objectives of the Conceptual Framework Project. (8 marks)

b) Identify and discuss the 5 benefits that can be expected to be derived from the FASBs conceptual framework study. (7 marks)

c) What is the most important quality for accounting information as identified in SFAC No. 2? Explain why it is the most important. (5 marks)