Statement of Financial Accounting Concepts No. 2 and FASB.

1. Identify and discuss the benefits that can be expected to be derived from the FASB's conceptual framework study.

2. What is the most important quality for accounting information as identified in Statement of Financial Accounting Concepts No. 2? Explain why it is the most important.

3. Statement of Financial Accounting Concepts No. 2 describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.

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2. What is the most important quality for accounting information as identified in Statement of Financial Accounting Concepts No. 2? Explain why it is the most important.

The most important quality for accounting information as identified in Statement of Financial Accounting Concepts No. 2 (Financial Accounting Standards Board, 2008) is reliability. Subject to constraints imposed by cost and materiality, increased reliability is the characteristic that makes information a more desirable commodity-that is, one useful in making decisions. If this quality is completely missing, the information will not be useful. Therefore, the choice of an accounting alternative should produce information that is reliable. To be reliable, information must have representational faithfulness and it must be verifiable and neutral. If accounting information is not reliable, it can cause an increase in a company's losses, even bankruptcy. An example of this is the Enron's case. Enron was on top of the world's business with stock trading at $80 a share ...