FAR #1 Fundamentals of Accounting & Conceptual framework Flashcards
APB (Accounting Principles Board
1959- 1973
AICPAs part time committee Accounting Principles Board which issued APB opinions and APB interpretations and determined US GAAP from 1959- 1973
Fundamental Qualitative Charateristics
Relevance
The relevance of information is affected by its nature and materiality. Information is material if omitting it or misstating it could influence decision making.
- Predictive Value
- Confirmatory Value
- Materiality
Faithful Representation
- Error Free
- Neutrality
- Completeness
SEC (Securities & Exchange Comission)
Established in 1934 by the securities Exchange Act
- SEC rules and regulations apply to all companies that issue securities in the US
- SEC has determined GAAP along with 3 different accounting bodies since 1934- CAP, APB, FASB
Periodicity Principle
Proper cut-off period
Matching Principle
- Expenses are matched and recorded in the period when benefits are received
- Revenues are matched and recorded in the period when benefits are provided.
Enhancing Qualitative Characteristics
-Comparability
- Understandability
- Timeliness
- Verifiability
Consistency Principle
Consistent Application of Accounting Policies and Principles
CAP (Committee on Accounting Procedures)
1939-1959
AICPAs part-time committee on Accounting Procedures which issued AICPA accounting research bulletins and determined US GAAP from 1939-1959
Monetary Principle
-Record events only when we can denote in monetary value
Standard Setting process
-Identify the issue
- Add it to the agenda
- Discussion
- First Draft
- Round table conference on draft
- Analyze comments
- Revise the draft
- issue accounting standards update
Accrual Principle
- Expense is i recorded in the period in which we receive benefit irrespective of when the cash is paid out.
- Income is recognized when the service or product is provided irrespective of when the cash is received.
Non-Authoritative GAAP
SFAC- Statement of Financial Accounting Concept
AICPA Industry and audit guides
AICPA statements of positions
Conservatism or prudence
-Record all estimated losses before they occur
- Do not record estimated gains
Going Concern
We record transactions with the assumption that business will continue forever.
FASB (Financial Accounting Standard Board)
-independent full-time organization established in 1973 and has determined US GAAP since then.
- Through 2009, FASB issued statements of financial accounting standards (SFAS), interpretations, technical bulletins, staff positions, staff implementation guides
- in 2009, FASB reorganized all GAAP pronouncements to create Accounting standards codification (ASC)
- Accounting Standard Codification (ASC) is the single source of authoritative non-governmental US GAAP replacing all non-SEC accounting literature issued prior to July 1, 2009.
