Ch. 1 - Financial Accounting And Accounting Standards

Question 0

What are the objectives of financial reporting?

Answer 0

Provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers.

Question 1

What are the characteristics of accounting?

Answer 1

The identification, measurement, and communication of financial information about economic entities to interested parties.

Question 2

What is financial reporting?

Answer 2

The financial information a company provides to help users with capital allocation decisions about the company.

Question 3

What are Users?

Answer 3

Investors and creditors that use financial reports to make their capital allocation decisions.

Question 4

What is Capital Allocation?

Answer 4

The process of determining how and at what cost money is allocated among competing interests.

Question 5

What is the General Purpose of Financial Statements?

Answer 5

To provide financial reporting information to a wide variety of users, and to provide the most useful information possible at the least cost.

Question 6

Who are the Primary User Group?

Answer 6

Investors

Question 7

Resources are what?

Answer 7

Limited

Question 8

Efficient use of resources often determines whether a business does what?

Answer 8

Thrives

Question 9

Investors are interested in assessing the company’s what?

Answer 9

Ability to generate net cash inflows, and management’s ability to protect and enhance the capital providers’ investments.

Question 10

What is Entity Perspective?

Answer 10

Companies viewed as separate and distinct from their owners.

Question 11

Various users need financial information for what?

Answer 11

Financial Statements

Question 12

The accounting profession has attempted to develop what set of standards?

Answer 12

Generally Accepted Accounting Principles

Question 13

What parties are involved in Standard Setting?

Answer 13

Securities and Exchange Commission, American Institute of Certified Public Accountants, and Financial Accounting Standards Board.

Question 14

What is the abbreviation for Securities and Exchange Commission?

Answer 14

SEC

Question 15

What is the abbreviation of American Institute of Certified Public Accountants?

Answer 15

AICPA

Question 16

What is the abbreviation for Financial Accounting Standards Board?

Answer 16

FASB

Question 17

What is the SEC?

Answer 17

Established by federal government, encouraged private standard, requires public companies to adhere to GAAP, and enforcement authority.

Question 18

What is the AICPA?

Answer 18

National professional organization that established Committee on Accounting Procedures and Accounting Principles Board.

Question 19

What is the Committee on Accounting Procedures?

Answer 19

1939 - 1959, Issued 51 Accounting Bulletins, and problem-by-problem approach failed.

Question 20

What is the Accounting Principles Board?

Answer 20

1959-1973, issued 31 Accounting Principle Board Opinions, Wheat Committee recommendations adopted in 1973.

Question 21

Wheat Committee’s recommendations resulted in creation of what?

Answer 21

FASB

Question 22

What is Financial Accounting Foundation?

Answer 22

Select members of the FASB, funds their activities, and exercises general oversight.

Question 23

What is Financial Accounting Standards Board?

Answer 23

Mission to established and improve standards of financial accounting and reporting.

Question 24

What is Financial Accounting Standards Advisory Council?

Answer 24

Consult on major policy issues.

Question 25

What are the differences between FASB and APB?

Answer 25

Smaller membership, Full-time, remunerated membership, greater autonomy, increased independence, and broader representation.

Question 26

What are the missions of FASB?

Answer 26

To establish and improve standards of financial accounting and reporting.

Question 27

What are the types of pronouncements?

Answer 27

Standards, Interpretations, and Staff Positions; Financial Accounting Concepts; and Emerging Issues Task Force Statements.

Question 28

What are Staff Positions?

Answer 28

Provides additional guidance on implementing or applying FASB standards or Interpretations.

Question 29

What are Interpretations (FASB)?

Answer 29

Represent extensions or modifications of existing standards.

Question 30

What is the Statement of Financial Accounting Standards?

Answer 30

Primary document of the FASB that establishes GAAP.

Question 31

What is the EITF Standards?

Answer 31

Provides guidance on how to account for new and unusual financial transactions that have the potential for creating diversity in financial reporting practices.

Question 32

What are opinions?

Answer 32

Official pronouncements of the APB.

Question 33

What are Accounting Pronouncements?

Answer 33

Standard setting bodes have issued a number of authoritative pronouncements.

Question 34

What is the first step of the Due Process System of the FASB?

Answer 34

Topics identified and placed on Board’s agenda.

Question 35

What is the second step of the Due Process System of the FASB?

Answer 35

Research and analysis conducted and preliminary views of pros and cons issued.

Question 36

What is the third step of the Due Process System of the FASB?

Answer 36

Public hearing on proposed standard.

Question 37

What is the fourth step in the Due Process System of the FASB?

Answer 37

Board evaluates research and public response and issues exposure draft.

Question 38

What is the fifth step of the Due Process System of the FASB?

Answer 38

Board evaluates responses and changes exposure draft, if necessary, final standard issued.

Question 39

What does the Statement of Financial Accounting Concepts do?

Answer 39

Sets forth fundamental objectives and concepts that will be used in developing future standards.

Question 40

What is the Accounting Standards Executive Committee (AcSEC)?

Answer 40

AICPA established this and they are responsible for Audit and Accounting Guides, Statements of Position (SOP), and Practice Bulletins.

Question 41

What does PCAOB?

Answer 41

Oversees the development of auditing standards.

Question 42

AICPA and AcSEC no longer issues what?

Answer 42

Authoritative accounting guidance for public companies.

Question 43

What are GAAP principles?

Answer 43

Principles that have substantial authoritative support.

Question 44

What are the major sources of GAAP?

Answer 44

FASB standards, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins.

Question 45

What is the goal in developing the FASB codification?

Answer 45

It to provide in one place all the authoritative literature related to a particular topic.

Question 46

FASB codification creates on level of GAAP which is considered what?

Answer 46

Authoritative

Question 47

What is the Financial Accounting Standards Board Codification Research System (CRS)?

Answer 47

FASB developed; is an online real-time database that provides easy access to the Codification.

Question 48

What is the FASB Codification Framework?

Answer 48

Topic, subtopics, sections, and paragraphs.

Question 49

What is a topic?

Answer 49

Provides a collection of related guidance on a given subject, such as receivables or leases.

Question 50

What is subtopics?

Answer 50

Subset of a topic and distinguished by type or scope. For example overall and troubled - debt restructuring are 2 subtopics of receivables.

Question 51

What are sections?

Answer 51

Indicate the type of content in a subtopic, such as initial measurement.

Question 52

What are paragraphs?

Answer 52

This level is where you will find the substantive content related to the issue researched.

Question 53

What are Financial Reporting Challenges?

Answer 53

Non-financial measurement, forward looking information, soft assets, and timeliness.

Question 54

What are the issues in Finanacial Reporting: Expectation GAAP?

Answer 54

Difficult to close in light of accounting scandals, Sarbanes-Oxley Act (2002), and Public Company Accounting Oversight Board (PCAOB).

Question 55

What are the two sets of standards accepted for international use?

Answer 55

U.S. GAAP, issued by the FASB ; International Financial Reporting Standards (IRFS), issued by the IASB.

Question 56

FASB and IASB recognize that global markets will best be served if how many sets of GAAP are used?

Answer 56

One set

Question 57

What are the types of Pronouncements?

Answer 57

International Financial Reporting Standards, Framework for Financial Reporting, and International Financial Reporting Interpretations.

Question 58

The International Accounting Standards Board (IASB) is composed of what four organizations?

Answer 58

International accounting Standards Committee Foundation (IASCF), International Accounting Standards Board (IASB), Standards Advisory Council, and International Financial Reporting Interpretations Committee (IFRIC).

Question 59

What is the International Organization of Securities Commissions?

Answer 59

Does not set accounting standards, and dedicated to ensuring that global markets can operate in an efficient and effective basis.

Question 60

What is International Accounting Standards Board (ISAB)?

Answer 60

Issues international financial reporting standards, standards used on most foreign exchanges, standards used by foreign companies listing on U.S. securities exchanges, IFRS used in over 115 countries.

Question 61

What is the hierarchy of IFRS?

Answer 61

1. International Financial Reporting Standards 2. International Accounting Standards 3. Interpretations originated by international Financial Reporting Interpretations Committee (IFRIC) or the former standing Interpretations Committee (SIC).