Knowledgeable Users of Financial Statements Recognize That the Numbers Reported

question 50

Essay

Knowledgeable users of financial statements recognize that the numbers reported in a company's financial statements depend on the accounting policies used to generate the numbers.Various choices of accounting policies exist,such as LIFO vs.FIFO for inventory costing and straight-line vs.double-declining balance for depreciation.APB Opinion No.22 requires that a company disclose the accounting policies used to ensure that statement users have the information they need to make sound decisions.
What problems arise from the large variety of accounting choices available?

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Definitions:

Autonomy

The right or condition of self-governance, or making one's own decisions without interference from others.

Choices

The act of making a decision or selection among different options or possibilities in various contexts.

Hypothetical Imperative

A command of reason that applies conditionally, suggesting an action to achieve a specific end, as opposed to a categorical imperative which is unconditional.

Humanity

The collective human race or the qualities, such as compassion and kindness, that are considered characteristic of humans.