#1 FASB and Standard Setting

Question 1

What is the main purpose of the Securities and Exchange Commission (SEC)?

Answer 1

The main purpose of the SEC is to promote efficient allocation of capital by maintaining open, orderly, and fair securities markets.

Question 2

What comprises United States Generally Accepted Accounting Principles (GAAP)?

Answer 2

The Financial Accounting Standards Board (FASB) Accounting Standards Codification, comprise authoritative U.S. GAAP for publicly traded companies, Securities and Exchange Commission (SEC) pronouncements are also GAAP.

Question 3

What is the role of the Financial Accounting Foundation (FAF)?

Answer 3

The FAF exercises oversight of the Financial Accounting Standards Board (FASB), appoints the members of the FASB, and ensures funding.

Question 4

What is the Financial Accounting Standards Board (FASB)?

Answer 4

The FASB establishes financial accounting standards for business entities.

Question 5

What is the role of the Financial Accounting Advisory Council (FASAC)?

Answer 5

The FASAC provides guidance on major policy issues, project priorities, and the formation of task forces.

Question 6

What are the first three steps the Financial Accounting Standards Board (FASB) uses when issuing a new accounting standard?

Answer 6

1. Considers whether to add a project to its agenda in consultation with the Financial Accounting Foundation (FAF);
2. Conducts research;
3. Holds a public hearing on the topic.

Question 7

What are the final three steps in the standard setting process?

Answer 7

1. Evaluate research and comments from interested parties and issue an exposure draft;
2. Solicit additional comments;
3. Finalize new accounting guidance and issue Accounting Standards Update (ASU).

Question 8

How do user groups influence the outcome of the Financial Accounting Standards Board (FASB) standards?

Answer 8

Users influence standards by providing input during the due process procedure.

Question 9

What is the American Institute of Certified Public Accountants (AICPA)?

Answer 9

The AICPA is the professional organization for participating CPAs.

Question 10

What does the Securities and Exchange Commission (SEC) do?

Answer 10

It administers the US securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.