Bobby Young is the accountant for the Blazers Ltd., which operates a new professional hockey team. He has just finished preparing the financial statements for the team's first year end, which falls on December 31, 2018. The chief financial officer (CFO) of the team is Bucky Ryan and he has just reviewed the financial statements and made the following requests of Bobby:

Because the team's bank has asked to have final copy of the financial statements by January 15, 1. 2019, Bobby recorded the utilities expense for December 2018 based on an estimate because he normally receives the utility bill three weeks after the month the bill pertains to. Bucky wants this removed from the financial statements because it is not a "solid" number based on an invoice.

2. The team has bought a small building near the arena. The area has recently been selected by the city for some significant development and consequently the value of the property has risen 15% in the past year. Bobby has not shown this increase in value on the financial statements but Bucky would like him to do so.

3. The team recently signed Wayne Crosby to play next year. Upon signing, the team paid Wayne a "no strings attached" signing bonus. Bobby recorded this as an expense but Bucky would like him to record it as an asset since it relates to a future period.

Instructions

(a) What is the objective of financial reporting? Do Bucky's suggestions for what should be reported on the financial statements meet the objective of financial reporting? Explain.

(b) For each of the items above, determine if the proposed changes enhance or diminish the qualitative characteristics of the team's financial statements. Also determine whether each item is dealing with the accounting issue in a manner that is consistent with the definitions for elements of financial statements.