A local Irving CPA explains Financial Accounting Reporting Practices
According to the CPA firms in Irving that we interviewed, the principal difference between the two capital maintenance concepts involved the effects of price changes during a period on assets while held and liabilities while own. Under the financial capital concept, if the effects of those price changes are recognized, there conceptually holding gains and losses and are included in the return on capital. Under the physical capital concept, if the effects of those price changes are recognized, they are conceptually holding gains and losses and are included in the return on capital. Under the physical capital concept, those changes would be recognized but conceptually would be capital maintenance adjustments that would be included directly in equity and not included in return on capital. Both earnings and comprehensive income as set forth in this statement, like present income, include holdings gains and losses that would be excluded from income under a physical capital maintenance concept.
More accounting and CPA terms de-mystified by a top firm:
According to CPAs in the Irving area that we interviewed (and listed above) although recognition involves considerations of relevance and comparability, recognition criteria, conventions, and rules are primarily intended to increase reliability. Uncertainty in business and economic affairs is a continuum ranging from mear lack of absolute sureness to a degree of vagueness that precludes anything other than guesswork in accounting.