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Financial Accounting And Reporting > Accounting Standards And Conceptual Framework > Flashcards

Accounting Standards And Conceptual Framework Flashcards

1
Q

Committee on Accounting Procedures (CAP)

A

Part time committee of the AICPA that promulgated Accounting Research Bulletins (ARB), which determines GAAP from 1939 until 1959.

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2
Q

Accounting Principals Board (APB)

A

Issues Accounting Principals Board Opinions (APBO) and APB Interpretations, which determined GAAP from 1959 until 1973.

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3
Q

Financial Accounting Standards Board (FASB)

A

Established in 1973 and has determined GAAP since.

Through 2009 issued:

Statements of Financial Accounting Standards (SFAS)
FASB Interpretations (FIN)
FASB Technical Bulletins (FTB)
Emerging Issues Task Forces (EITF)
FASB Staff Positions
FASB Implementation Guides
Statements of Financial Accounting Concepts (SFAC)

Comprise of 7 Members who serve for 5 years with one renewable 5 year term.

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4
Q

FASB Accounting Standards Codification

A

July 1, 2009 became the single source of authoritative nongovernmental U.S. GAAP

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5
Q

Securities Exchange Commission (SEC)

A
  • Established by the Securities Act 1934.

- All companies that issue securities are subject to SEC rules and regulations.

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6
Q

What are some of the Authoritative Literature included in the Codification?

A
  1. FASB
    a. Statement of Financial Accounting Standards
    b. Interpretations
    c. Technical Bulletins
    d. Staff Positions
    e. Staff Implementation Guides
    f. Statement No. 138 Examples
  2. Emerging Issues Task (EITF)
  3. Derivative Implementation Group Issues
  4. Accounting Principals Group Issues
  5. Accounting Research Bulletins
  6. Accounting Interpretations
  7. AICPA
    a. Statements of Position
    b. Auditing and Accounting Guides
    c. Practice Bulletins
    d. Technical Inquiry Service
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7
Q

What are some of the SEC Standards Includes in the Codification?

A
  1. Regulation S-X
  2. Financial Reporting Releases (FRR)
  3. Accounting Series REleases (ASR)
  4. Interpretative Releases (IR)
  5. Staff Accounting Bulletins (SAB)
  6. EITF
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8
Q

How are new standards and/or amendments made to the Accounting Standards Codification?

A
  1. Issues to the public for comment in the form of Exposure Drafts.
  2. Majority vote of the Board members is required to approve an Exposure Draft for issuance.
  3. FASB analyzes any feedback
  4. Board redeliberates and a majority vote from the Board is required to amend/add to the ASC.
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9
Q

What is the purpose of the International Accounting Standards Board (IASB)?

A

To develop a single set of high-quality, global accounting standards.

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10
Q

How many members comprise the IASB?

A

15 full-time members and 2 part-time members.

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11
Q

What is the purpose of the International Financial Reporting Interpretations Committee (IFRIC)?

A

Provide guidance on newly identified financial reporting issues not addressed in the in the IFRSs and assists the IASB in achieving international convergence of accounting standards.

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12
Q

Who issues International Financial Reporting Standards?

A

IASB

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13
Q

How do you add a new International Financial Accounting Standard?

A
  1. Publishes a discussion (not required) and reviews commments.
  2. IASB issues an Exposure Draft for public comment.
  3. Nine members of the IASB must approve an Exposure Draft for issuance.
  4. After the Exposure Draft public comment period is over, IASB analyzes the comments and re-deliberates.
  5. Once satisfied IASB drafts the IFRS.
  6. Finally the IFRS must be approve by nine members.
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14
Q

What is the purpose of the Conceptual Framework for Financial Reporting?

A

To converge and improve the FASB and IASB financial reporting frameworks.

Assists the IASB in developing future IFRSs, evaluating existing IFRSs, and reducing the number of alternative accounting treatments permitted by IFRSs.

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15
Q

What is the purpose of the International Convergence of Accounting Standards?

A

The goal of the convergence project is to produce a single set of high quality, international accounting standards that companies can use for both domestic and cross border financial reporting.

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16
Q

What is the Statements of Financial Accounting Concepts?

A

Serves as a basis for all FASB pronouncements.

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17
Q

Who are the Primary Users of the general purpose Financial Reports?

A

Investors, Lenders, and Other Creditors.

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18
Q

What are the Fundamental Qualitative Characteristics?

A

Relevance and Faithful Representation

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19
Q

Name the three components of Relevance

A

Predictive Value - Information has predictive value if it can be used by users to predict future outcomes.

Confirming Value - Information has confirming value if it provides feedback about evaluations previously made by users.

Materiality - Information is material if an omission or misstatement of information could affect the decisions made by users based on financial information.

20
Q

Name the three components of Faithful Representation

A

Completeness - A complete depiction of financial information includes all information necessary for the user to understand the reported economic phenomena, including descriptions and explanations.

Neutrality - A neutral depiction of financial information is free from bias in selection or presentation.

Freedom from Error - No errors in the selection or application of the process used to produce reported financial information.

21
Q

What are the Enhancing Qualitative Characteristics?

A

Comparability
Verifiability
Timeliness
Understandability

22
Q

What is Comparability?

A

Information is more useful if it can be compared with similar information about other entities or from other time periods.

23
Q

What is Verifiability?

A

Means that different knowledgeable and independent observers can reach consensus that a particular depiction is faithfully represented.

24
Q

What is Timeliness?

A

Information is available to users in time to be capable of influencing their decisions

25
Q

What is Understandability?

A

Information is understandable if it is classified, characterized, and presented clearly and concisely.

26
Q

What does the Cost Constraint state?

A

The benefits of reporting financial information must be greater than the costs of obtaining and presenting the information.

27
Q

What are the characteristics of Nonbusiness Organizations?

A
  1. A significant portion of their resources come from contributions and grants.
  2. Their operating purposes are other than to provide goods or services for profit.
  3. They lack ownership interests that can be sold, transferred, or redeemed, or that allow a claim on resources upon liquidation.
28
Q

What should a Full Set of Financial Statements include?

A
  1. Statement of financial position (balance sheet)
  2. Statement of earning (the income statement)
  3. Statement of Comprehensive income
  4. Statement of cash flows
  5. Statement of changes in owner’s equity.
29
Q

What is Realization?

A

When something that is sold and converted to cash (or claims to cash).

30
Q

What is Recognition?

A

When something is recorded in the Financial Statements.

31
Q

What are the 10 elements of the Financial Statement?

CREG and LALEID

A 
Comprehensive Income
Revenue
Expenses
Gains
Losses
Assets
Liabilities
Equity (of net assets)
Investments by Owners
Distributions by Owners
32
Q

What is Comprehensive Income?

A

Includes all differences between beginning equity and ending equity other than transactions with owners.

33
Q

What is Revenue?

A

Inflows, enhancements of assets, or reductions of liabilities from delivering goods or servers.

34
Q

What are Expenses?

A

Outflows, users of assets, or the incurrence of liabilities from delivering goods or services.

35
Q

What are Gains?

A

Increases in equity.

36
Q

What are Losses?

A

Decreases in equity.

37
Q

What are Assets?

A

Probable future economic benefits to be received.

38
Q

What are Liabilities?

A

Probable future sacrifices of economic benefits arising from a present obligation.

39
Q

What is Equity?

A

Residual interest in the assets of the company that remains after deducting its liabilities.

40
Q

What is Investments by Owners?

A

Increases in assets from transfers of cash, property, or services from owners.

41
Q

What is Distributions to Owners?

A

Decreases in assets from transfers of cash, property, or services, or the incurrence of a liability to owners.

42
Q

What are the six elements of Financial Statements according to the IASB Framework?

ALEIEC

A 
Assets
Liabilities
Expenses
Income
Equity
Capital Maintenance Adjustments
43
Q

What are Capital Maintenance Adjustments?

A

Increases and decreases in equity that arise from the revaluation or restatement of assets and liabilities.

44
Q

What are the five elements of present value measurement?

EVTUO

A

ESTIMATE of future cash flow
Expectations about timing VARIATIONS of future cash flows
TIME value of money (the risk-free rate of interest)
The price for bearing UNCERTAINTY
OTHER factors (e.g, liquidity issues and market imperfections.

45
Q

Describe the expected cash flow approach for present value computations.

A

Uses only the risk-free rate of return as the discount rate and then turns its attention to the expected future cash flows, considering uncertainties as adjustments to the future cash flows.

Financial Accounting And Reporting (3 decks)

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