Ch 5 Review Questions Flashcards
Explain what it means for guidance to be “nonauthoritative.”
It is not included within the FASB Codification.
Guidance excluded from the Codification is not considered GAAP and cannot be relied upon exclusively.
What is the browse path for accessing Topic 105? In other words, in which area would you start?
Once the Codification has been accessed at fasb.org, the browse path for accessing Topic 105 is General Principles > 105 Generally Accepted Accounting Principles.
Briefly, summarize the key points made in the first sentence of ASC 105-10-05-01.
Establishes the FASB Codification as the source of authoritative GAAP for nongovernmental entities.
Briefly, summarize the key points made in the first sentence of ASC 105-10-05-02.
An entity should consider accounting principles for similar transactions or events that are authoritative GAAP before considering nonauthoritative sources.
List three sources of nonauthoritative guidance that are named in ASC 105-10-05-03.
1) FASB Concept Statements
2) IFRS of the IASB
3) Accounting textbooks
Identify two benefits of using nonauthoritative sources.
1) Provides guidance on issues not addressed in the Codification
2) Provides additional context for better understanding of the Codification
Describe a circumstance in which a researcher might refer to the conceptual framework.
When determining if an item or event should receive financial statement recognition.
Ex.
CON 5 establishes four fundamental recognition criteria, which can be consulted if the Codification does not address a particular class of transaction in question.
What is one example of information that a researcher can find in an Accounting Standards Update, but which is not available in the Codification?
A standard setter’s basis for conclusion.
The basis for the Board’s conclusion is often omitted from the Codification content due to being “nonessential.”
Reviewing this rationale can aid in better understanding the application of the standards.
What are two key purposes of the FASB’s Conceptual Framework?
1) Provides the FASB with a common framework to guide the development of its new standards.
2) Provides practitioners with key objectives and principles to consider in their preparation of financial statements.
Are Accounting Standards Updates (ASUs) authoritative? Explain.
No.
ASUs are a nonauthoritative source that refer to guidance issued by the FASB to make changes to the Codification.
What two other names are used to describe FASB’s Conceptual Framework?
1) FASB Concepts Statements (CON)
2) Statements of Financial Accounting Concepts (SFAC)
