FASB and Standard Setting Flashcards
Does the SEC establish GAAP?
-No typically delegates this duty to the FASB but has right to and in some instances has reversed or modified FASB pronouncements
Does the SEC establish GAAP?
-No typically delegates this duty to the FASB but has right to and in some instances has reversed or modified FASB pronouncements
Which firms previously and now promulgate GAAP?
1) Committee on Accounting Procedure (CAP)
2) Accounting Principles Board (APB)
3) Financial Accounting Standards Board (FASB)
Is the FASB affiliated with the AICPA?
-No
What are the 3 parts of the current accounting standard setting mechanism in the US?
- Financial Accounting Foundation (FAF) which exercises oversight over the FASB
- FASB, independent body which establishes accounting standards
- Financial Accounting Standards Advisory Council (FASAC), provides guidance on major policy issues, project priorities, and formation of task forces
List the characteristics of FASB members.
- Seven full time members with renewable (one additional term) and staggered 5 yr terms
- Members cannot have employment or investment ties with other entities
What principles does FASB use in promulgating GAAP?
- Accounting standards should be unbiased and for benefit of financial statement users
- Views of accounting profession should not take precedence
- Process of developing standards should be open to public and allow due process
What does FASB’s Emerging Issues Task Force (EITF) do?
- Act as filter for FASB enabling FASB to focus on more pervasive issues
- When consensus of 15 members reached EITF pronouncements included in GAAP without action required by FASB
Is the Conceptual Framework (Statements of Financial Accounting Concepts) GAAP?
-No, simply guidelines for establishing GAAP
What’s SEC process when an accounting irregularity is found?
- Send “deficiency” letter
- Possibly issue “stop order” to halt trading
- Possible criminal sanctions if disagreement not resolved
