Chapter 1 Stice Cardlet Copy

Question 1

How did GAAP Evolve?

Answer 1

Start with Stock Market crash of 1929, SEC formed 1933 and 1934 acts

Question 2

Committee on Accounting Procedures? (CAP)

Answer 2

1939-1959 Pronouncements: accounting research bulletins

Question 3

Accounting Principles Board APB

Answer 3

1959-1973 Pronouncements APB Opinions

Question 4

Financial Accounting Standards Board FASB

Answer 4

Begin in 1973-Is the current standards, Pronouncements: Statements of Financial Accounting Standards or SFAS

Question 5

SEC

Answer 5

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.

Question 6

SEC Requirements

Answer 6

Requires annual, quarterly, and special event filings (10-K(annual), 10-Q(quarterly), 8-K(any significant information that should be disclosed) respectively)

Question 7

SEC Standards

Answer 7

Issues its own standards, Financial Reporting Releases FRR

Question 8

SEC interpretations

Answer 8

Staff Accounting Bulletins SAB

Question 9

What does FASB stand for?

Answer 9

Financial Accounting Standards Board.

Question 10

FASB

Answer 10

Private-sector body responsible for establishment of U.S. accounting standards also known as GAAP

Question 11

How many full time members are employeed by FASB

Answer 11

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

Question 12

Who appoints new members to the FASB

Answer 12

Appointing new members is done by the Financial Accounting Foundation FAF

Question 13

SFAS?

Answer 13

SFAS -Statement of Financial accounting standards-Guidance on specific technical accounting and reporting issues.

Question 14

SFAC?

Answer 14

Statements of Financial Accounting Concepts-Broad conceptual Framework-Serves as basis for developing SFAS

Question 15

EITF?

Answer 15

Emerging Issues Task Force-Guidance on issues, generally industry specific, for things taht need quick resolution (surrogate GAAP until issue addressed)

Question 16

FASB’s Process?

Answer 16

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.

Question 17

Standards Enforcement?

Answer 17

FASB has no enforcement POWER, all power lies with SEC. FASB process can be very political

Question 18

AICPA

Answer 18

American Institute of Certified Public Accountants; Administers and grades the Uniform CPA Exam, Code of professional conduct, continuing Professional Education CPE)

Question 19

CPA requirements for GA

Answer 19

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)

Question 20

AAA?

Answer 20

American Accounting Association

Question 21

IRS

Answer 21

Internal Revenue Service-TAX rules

Question 22

IASB

Answer 22

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.

Question 23

How many members sits on board of IASB

Answer 23

15 board members from; US, UK, France, Sweden, China, Australia, South Africa, and Japan.

Question 24

IFRS stand for?

Answer 24

International Financial Reporting Standards issued by the IASB

Question 25

When did SEC allow non U.S. companies to use IASB standards in the US stock exchange?

Answer 25

2008.

Question 26

When did the FASB introduce a new codification of professional standards? SFAS 168?

Answer 26

IN 2009. This approach has two categories. Authoritative (FASB Profesional View Standards Codification) and Non-Authoritative

Question 27

What does GAAP stand for?

Answer 27

Generally Accepted Accounting Practices

Question 28

What does Conceptual Framework Provide?

Answer 28

It provides a theoretical foundation to impose organization and consistency to standard setting process (revision and development standards)

Question 29

What are the four areas that the 7 concept statements address?

Answer 29

Objectives; Purpose of financial reporting. 2. Qualitative Charachteristics: qualities of useful information. 3. Elements: define assets, Liabilties, etc. 4. Recognition, measurement and reporting: implementation.

Question 30

What is the Overall Objective of Financial Reporting?

Answer 30

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.

Question 31

What is the seven objectives of financial accounting?

Answer 31

Usefulness, Understandability, Target Audience: Investors and Creditors, Assessing Future Cash Flows, Evaluating Economic Resources, Primary Focus on earnings.

Question 32

Define Understandability?

Answer 32

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.

Question 33

Target Audience?

Answer 33

Target audience are Investors and creditors. While there are many potiential users of financial reports, the objectives are directed primarily toward investors and creditors.

Question 34

Assessing Future Cash Flows?

Answer 34

Financial reporting should provide information that is useful in accessing amounts, timing, and uncertainty (risk) of prospective cash flows.

Question 35

Evaluating Economic Resources?

Answer 35

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.

Question 36

Primary focus on Earnings?

Answer 36

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.

Question 37

What are the Five Measurement Attributes?

Answer 37

1. Historical Cost 2. Current Replacement Cost, 3.Fair Value, 4.Net Realizable Value, 5. Present (or discounted) Value.

Question 38

What is Recognition?

Answer 38

Taking all the estimates and judgements into one number and using that number to make a journal entry

Question 39

What is the Recognition Criteria?

Answer 39

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.

Question 40

Define Disclosure?

Answer 40

Skipping the journal entry and just relying on the note to convey the information to the users.

Question 41

Reporting? Included in the set of G/P financial statements what reports that show the following?

Answer 41

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.

Question 42

The seven Concepts Statements address four major areas. What are they?

Answer 42

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?

Question 42

How did GAAP Evolve

Answer 42

Start with Stock Market crash of 1929, SEC formed 1933 and 1934 acts