Chapter 1 Stice Cardlet Copy Flashcards
How did GAAP Evolve?
Start with Stock Market crash of 1929, SEC formed 1933 and 1934 acts
Committee on Accounting Procedures? (CAP)
1939-1959 Pronouncements: accounting research bulletins
Accounting Principles Board APB
1959-1973 Pronouncements APB Opinions
Financial Accounting Standards Board FASB
Begin in 1973-Is the current standards, Pronouncements: Statements of Financial Accounting Standards or SFAS
SEC
Securities and Exchange Commission-Established standardiz Accounting. Granted legal authority to establish GAAP. Tends to defer setting GAAP to the accounting profession. Governs the issue and trading securities.
SEC Requirements
Requires annual, quarterly, and special event filings (10-K(annual), 10-Q(quarterly), 8-K(any significant information that should be disclosed) respectively)
SEC Standards
Issues its own standards, Financial Reporting Releases FRR
SEC interpretations
Staff Accounting Bulletins SAB
What does FASB stand for?
Financial Accounting Standards Board.
FASB
Private-sector body responsible for establishment of U.S. accounting standards also known as GAAP
How many full time members are employeed by FASB
7 full time members drawn from a variety ofbackgrounds- auditing, corporate accounting, financial, and academia. Members are required to sever all connections with their institutions prior to assuming membership on the board
Who appoints new members to the FASB
Appointing new members is done by the Financial Accounting Foundation FAF
SFAS?
SFAS -Statement of Financial accounting standards-Guidance on specific technical accounting and reporting issues.
SFAC?
Statements of Financial Accounting Concepts-Broad conceptual Framework-Serves as basis for developing SFAS
EITF?
Emerging Issues Task Force-Guidance on issues, generally industry specific, for things taht need quick resolution (surrogate GAAP until issue addressed)
FASB’s Process?
Process is lengthy and incluedes, hold meetings, develop preliminary views report; review public comment letters, develop exposure drafts (ED); review of more public comments; then issue SFAS, revise ED, or abandon project.
Standards Enforcement?
FASB has no enforcement POWER, all power lies with SEC. FASB process can be very political
AICPA
American Institute of Certified Public Accountants; Administers and grades the Uniform CPA Exam, Code of professional conduct, continuing Professional Education CPE)
CPA requirements for GA
BBA (120 hours) 30 hours of acctg, 24 hours. Total of 150 hours general business. 1 year continuous experience in public accounting, industry, government or college teaching (Min of 2000 hours)
AAA?
American Accounting Association
IRS
Internal Revenue Service-TAX rules
IASB
International Accounting Standards Board. Formed in 1973 to develop worldwide accounting standards. Similar to FASB, IASB develops proposals, circulates these among interested organizaiont, receives feedback, and issues final pronouncement.
How many members sits on board of IASB
15 board members from; US, UK, France, Sweden, China, Australia, South Africa, and Japan.
IFRS stand for?
International Financial Reporting Standards issued by the IASB
When did SEC allow non U.S. companies to use IASB standards in the US stock exchange?
2008.
When did the FASB introduce a new codification of professional standards? SFAS 168?
IN 2009. This approach has two categories. Authoritative (FASB Profesional View Standards Codification) and Non-Authoritative
What does GAAP stand for?
Generally Accepted Accounting Practices
What does Conceptual Framework Provide?
It provides a theoretical foundation to impose organization and consistency to standard setting process (revision and development standards)
What are the four areas that the 7 concept statements address?
Objectives; Purpose of financial reporting. 2. Qualitative Charachteristics: qualities of useful information. 3. Elements: define assets, Liabilties, etc. 4. Recognition, measurement and reporting: implementation.
What is the Overall Objective of Financial Reporting?
USEFULNESS!!! Financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.
What is the seven objectives of financial accounting?
Usefulness, Understandability, Target Audience: Investors and Creditors, Assessing Future Cash Flows, Evaluating Economic Resources, Primary Focus on earnings.
Define Understandability?
Financial reporting should provide information that is understandable to one who has a reasonable knowledge of accounting and busienss and who is willign to study and analyze the information presented.
Target Audience?
Target audience are Investors and creditors. While there are many potiential users of financial reports, the objectives are directed primarily toward investors and creditors.
Assessing Future Cash Flows?
Financial reporting should provide information that is useful in accessing amounts, timing, and uncertainty (risk) of prospective cash flows.
Evaluating Economic Resources?
Financial reporting should also provide information about a companys assets, liablities, and owners equity to help investors, creditors, and others evaluate the financial strengths and weaknesses of the enterprise and its liquidity and solvency.
Primary focus on Earnings?
Information about company earnings, measued by accrual acounting, generally provides a better basis for forecasting future performance than does information about current cash receipts and disbursements.
What are the Five Measurement Attributes?
- Historical Cost 2. Current Replacement Cost, 3.Fair Value, 4.Net Realizable Value, 5. Present (or discounted) Value.
What is Recognition?
Taking all the estimates and judgements into one number and using that number to make a journal entry
What is the Recognition Criteria?
For an item to be formally recognized, it must meet one of teh definitinos of the elements of the financial statements. For example, revenue must meet the definition of revenue to be recorded and reported on the income statement.
Define Disclosure?
Skipping the journal entry and just relying on the note to convey the information to the users.
Reporting? Included in the set of G/P financial statements what reports that show the following?
Financial position at the end of the period, earnings (net income) for the period; cash flows during the period; investments by the distribution to owners during the period; comprehensive income for the period.
The seven Concepts Statements address four major areas. What are they?
Objectives: What are the purposes of financial reporting?
Qualitative characteristics: What are the qualities of useful financial information?
Elements: What is an asset? a liability? a revenue? an expense?
Recognition, measurement, and reporting: How should the objectives, qualities, and elements definitions be implemented?
How did GAAP Evolve
Start with Stock Market crash of 1929, SEC formed 1933 and 1934 acts
