Accounting Standards and Conceptual Frameworks Flashcards
Legal authority to establish US generally accepted accounting principles (GAAP)
SEC
In most cases, SEC has allowed the _______ ________ to establish GAAP and self-regulate
accounting profession
Established in 1934. All companies that issues securities in the US are subject to this entity’s rules and regulations
SEC
Established in 1973 and has determined GAAP since then
FASB (financial accounting standards board)
Effective July 1, 2009, the FASB ______ _______ ______ became the single source of authoritative nongovernmental US GAAP
Accounting Standards Codification
Accounting and financial reporting practices not included in the Codification are _____ ______
not GAAP
Accounting Standards Updates are not ________ literature
authoritative
Provides background information, updates the Codification, and describes the basis for conclusions on changes in the Codification
Accounting Standards Updates
All new GAAP and SEC amendments are ____ ______ into the existing structure of the Codification
fully integrated
Established in 2001 as a part of the International Financing Reporting Standards (IFRS) Foundation
International Accounting Standards Board (IASB)
The purpose of IASB is to:
develop a single set of high-quality, global accounting standards
Provides guidance on newly identified financial reporting issues not addressed in the IFRSs and assists the IASB in achieving international convergence of accounting standards
IFRIC (International Financial Reporting Interpretations Committee)
_______ includes IFRSs, IASs, and interpretations developed by the IFRIC and the former SIC
IFRS
SEC _______ the IASB/FASB convergence project
supports
Statements of Financial Accounting Concepts (SFAC) are ____ _____
not GAAP
The objective of general purpose financial reporting is to:
disclose entity’s performance
Primary users
existing and potential investors, lenders, and other creditors who use financial statements to assess the reporting entity’s prospects for future net cash inflows to the entity
Fundamental Qualitative Characteristics must have (2):
relevance & faithful representation
Characteristics of relevance (3 ; passing confirms money):
predictive value, confirming value, materiality
Characteristics of faithful representation (3: completely neutral is free from error):
completeness, neutrality, freedom from error
Enhancing qualitative characteristics (4; compare and verify in time to understand)
Comparability, verifiability, timeliness, understandability
Full set of financial statements (5)
Balance sheet (statement of financial position), income statement (statement of earnings), statement of comprehensive income, statement of cash flows, statement of changes in owners’ equity
Conservatism principle
selecting the method that is least likely to overstate assets and understate liabilities`
The two assumptions of IFRS:
accrual basis accounting & going concern
Elements of financial statements (REGL ALE needs ID)
revenues, expenses, gains, losses, assets, liabilities, equity, investment by owners, distributions to owners
Increases and decreases in equity that arise from the revaluation or restatement of assets and liabilities (associated with IFRS)
Capital maintenance adjustments
Five elements of present value measurement
estimate future cash flow, timing, time value of money, price for bearing uncertainty, other factors (credit risk)
Using the traditional approach for present value computations, _____ _______ _______ is paramount
interest rate selection
Expected cash flow approach is more ______ than the traditional method
complex
