Question

Does GAAP routinely require companies to disclosure forecasts of financial variables to external users? Indicate yes or no and explain how your answer relates to the qualitative characteristics of accounting information.

Answer 1

GAAP does not require companies to disclose financial forecasts as they could compromise the reliability and verifiability of financial information, which are key qualitative characteristics of accounting information.

Step-by-step explanation:

No, GAAP (Generally Accepted Accounting Principles) does not routinely require companies to disclose forecasts of financial variables to external users. Disclosing such forecasts is not typically mandated because they deal with future events that are uncertain and thus, could potentially mislead users of financial statements. The qualitative characteristics of accounting information, as per GAAP, include relevance and faithful representation. Forecasts could be relevant, but due to their inherent uncertainty, may lack the reliability needed for faithful representation. Moreover, GAAP focuses on providing information that helps users make decisions based on historical financial data that are verifiable and objective.

Answer 2

No, they don´t.

Step-by-step explanation:

Forecast is not required by GAAP, as the Relevance and the Faithful Representation are concepts that are not compatible with data projection. Forecast implies estimates, and subjective interpretations that do not fulfill financial statements aim and are difficult to verify.