Conceptual Framework

Question 1

What is the SEC, when was it established, and what roll does it play regarding “Public Company”?

Answer 1

The SEC, is the Security and Exchange Commission, it was established by the Congress in 1934.

The SEC sets the rules and regulations that govern all companies that issue securities (both debt and equity) in the United States.

In particular the SEC has the sole legal right to issue Generally Accepted Accounting Principles (GAAP) in the United States, even though it has allowed the accounting profession since its establishment to issue GAAP and to regulate itself.

Question 2

What are the THREE accounting bodies that historically took the roll of issuing Generally Accepted Accounting Principles in the US?

Answer 2

1- Committee on Accounting Procedure (CAP): A part time accounting committee of the AICPA. It took the role of setting GAAP for 20 years from 1939-1959.

2- Accounting Principles Board (APB) : A part time accounting committee of the AICPA. It took the role of setting GAAP for 14 years from 1959-1973.

3- Financial Accounting Standards Board (FASB): an independent accounting body established in 1973, that that constitute of SEVEN full time members that serve for five year term

Question 3

List the literature that is included in the Accounting Standards Codification?

Answer 3

Codification Includes:

1 - Authoritative Literature - FEDPRIA
2- Relevant Portion of SEC Pron’s.
3- Accounting Standards Updates

The Authoritative Literature FEDPRIA incudes the following publications:

(F) FASB Literature
(E) EITF Abstracts
(D) Derivative Imp. Group Issues
(P) Accounting Principles Board Op's.
(R) Accounting Research Bulletin
(I)  Accounting Interpretations
(A) AICPA publications

Question 4

What is “Accounting Standards Updates - ASU” and what does it serve?

Answer 4

All new GAAP and SEC amendments are fully integrated into the existing structure of the codification. And for that an Accounting Standard Update (ASU) is not an authoritative literature, it is a transient document that:

1 - Summarizes key provisions of the project.
2- Details Specific amendments.
3- Explains the basis of the Board decision.

Question 5

Terminology - What is the difference between a Commission and a Committee?

Answer 5

A Commission is a specific type of agency appointed by government to accomplish a specific task, a commission does not have authority by its own, but it derives the authority from the government entity that appointed it.

A Committee is a group of people that gather to deliberate and take decision on a specific topic or to come out with a joint paper.