SERS OF FINANCIAL STATEMENTS INCLUDED management of a company's shareholders, bondholders, security analysts, vendors, lending institutions, employees, labor unions, management agencies, and the general public. They use financial statements to make decisions. For example, potential investors use financial statements as an aid in deciding whether to buy shares. The supplier uses financial statements to decide whether or not to sell goods for a credit card company. Labor unions to use financial statements to help identify their needs as they negotiate for workers | I I G II I II I D I I I o N Financial Reporting ANALYSIS USING FINANCIAL ACCOUNTING INFORMATION CHARLES H. GIBSON APTER 1 Users of financial statements include a company s managers stockholders bondholders security analysts suppliers lending institutions employees labor unions regulatory authorities and the general public. They use the financial reports to make decisions. For example potential investors use the financial reports as an aid in deciding whether or not to buy the stock. Suppliers use the financial reports to decide whether or not to sell merchandise to a company on credit. Labor unions use the financial reports to help determine their demands when they negotiate for employees. Management could use the financial reports to determine the company s profitability. Demand for financial reports exists because users believe that the reports help them in decision making. In addition to the financial reports users often consult competing information sources such as new wage contracts and economy-oriented releases. This book concentrates on using financial accounting information properly. Users must have a basic understanding of generally accepted accounting principles and traditional assumptions of the accounting model in order to recognize the limits of financial reports. The ideas that underlie financial reports have developed over several hundred years. This development continues today to meet the needs of a changing society. A review of the evolution of generally accepted accounting principles and the traditional assumptions of the accounting model should help the reader understand the financial reports and thus analyze them better. 2 Introduction to Financial Reporting Development OF Generally Accepted Accounting Principles GAAP Generally accepted accounting principles GAAP are accounting principles that have substantial authoritative support The accountant must be familiar with acceptable reference sources in order to decide whether any particular .
