FAR - GAAP Overview COPY

Question 1

What does generally accepted accounting principles (GAAP) address?

Answer 1

1. Recognition
2. Measurement
3. Disclosure

Question 2

What body developed generally accepted accounting principles (GAAP)?

Answer 2

……………………………………………………..

FASB = Financial Accounting Standards Board

Question 3

The FASB Accounting Standards Codification presents relevant SEC guidance for publicly traded firms?

True or False

Answer 3

True - The Accounting Standards Codification (ASC) is the compilation and organization of all GAAP sources. For publicly traded entities, the SEC has additional reporting guidelines.

Question 4

What are the seven key components of general-purpose external financial reporting?

Answer 4

1. Income Statement
2. Statement of Comprehensive Income
3. Balance Sheet (Statement of Financial Position)
4. Statement of Changes in Owner’s Equity
5. Statement of Cash Flows
6. Footnote Disclosures and Supplementary Schedules
7. Auditor’s Opinion

Question 5

What does the Securities and Exchange Commission (SEC) do?

Answer 5

The SEC administers the U.S. Securities Laws, not notable the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as others.

Question 6

What is the MAIN purpose of the SEC?

Answer 6

To promote efficient allocation of capital by maintaining, open, orderly, and fair securities markets.

Question 7

What comprises Unites States generally accepted accounting principles (GAAP)?

Answer 7

The Financial Accounting Standards Board (FASB) Accounting Standards Codification comprise authoritative U.S. GAAP for publicly traded companies. SEC pronouncements are also considered GAAP for publicly traded entities.

Question 8

What is the role of the Financial Accounting Foundation (FAF)?

Answer 8

The FAF exercises oversight of the FASB, appoints members, and ensures funding.

Question 9

What is the Financial Accounting Standards Board (FASB)?

Answer 9

The FASB establishes financial accounting standards for business entities.

Question 10

What is the role of the Financial Accounting Advisory Council (FASAC)?

Answer 10

The FASAC provides guidance on major policy issues, project priorities, and the formation of task forces.

Question 11

“Economic consequences” is a concept used by the FASB to gain acceptance of its proposed standards?

True or False

Answer 11

False - the needs and views of the economic community should be considered; the views of the accounting profession should not take precedence. Accounting standards should be unbiased and not favor any particular industry; standards are set forth for the benefit of financial statement users.

The Benefits of accounting standards SHOULD NOT exceed their cost.

Question 12

How are changes to the FASB Accounting Standards Codification accomplished?

Answer 12

An Accounting Standard Update (ASU) is issued.

Question 13

What is the FASB Accounting Standards Codification structure?

Answer 13

Area-Topic-SubTopic-Section-Subsection-Paragraph

Question 14

What is the purpose of the FASB Accounting Standards Codification?

Answer 14

1. Simplify structure and accessibility
2. Provide all authoritative literature in a single location
3. Reduce time and effort required to research
4. Reduce risk of non-compliance
5. Facilitate updating of standards
6. Assist with convergence of IFRS

Question 15

The FASB Accounting Standards Codification provides Industry specific accounting guidance?

True or False

Answer 15

True

Question 16

The Codification is the sole source of U.S. GAAP for nongovernmental entities?

True or False

Answer 16

True -

The Codification includes all authoritative principles generally accepted and adopted before the Codification. This includes parts of APB Opinion, FASB Interpretations, and others.

Question 17

International accounting standards are NOT included in the FASB Accounting Standards of Codification?

True or False

Answer 17

True - IFRS are not U.S. GAAP and thus are not included in the Codification