Framework Overview & Statements Flashcards
Standard setting body in the United States…
Financial Accounting Standards Board (FASB)
The federal government agency that administers the securities laws of the U.S…
Securities and Exchange Commission (SEC)
The national professional organization for practicing CPAs
American Institute of Certified Public Accountants (AICPA)
Appoints the members of the FASB and its advisory councils, ensures adequate funding for the FASB and exercises oversight over the FASB
Financial Accounting Foundation (FAF)
Establishes financial accounting standards for business entities
FASB
Provides guidance on major policy issues, project priorities & the formation of task forces
Financial Accounting Standards Advisory Council (FASAC)
In reference to proposed accounting standards, the term “negative economic consequences” includes:
The inability to raise capital
What is the primary protection for investors against fraudulent financial reporting by corporations?
The requirement that financial statements be audited
What group currently writes GAAP?
FASB
What is the role of the Financial Accounting Foundation?
The FAF exercises oversight of the FASB, appoints members of the FASB & ensures funding.
What is the role of the Financial Accounting Advisory Council (FASAC)?
The FASAC provides guidance on major political issues, project priorities, & the formation of task forces
How do user groups influence the outcome of FASB standards?
Users influence standards by providing input during the due process procedure
What are the final 3 steps in the standard setting process?
- Evaluate research & comments from interested parties & issue an exposure draft
- Solicit additional comments
- Finalize new accounting guidance & issue Accounting Standards Update (ASU)
In analyzing a company’s financial statements, which financial statement would a potential investor use primarily to assess the company’s liquidity & financial flexibility?
Balance sheet
The rules of financial reporting for business enterprises. “Accounting Standards”
Generally Accepted Accounting Principles (GAAP)
The cash basis of accounting overstates income by the net increase during the accounting period of the
Accrued expenses payable
Increases in net assets from incidental or peripheral transactions affecting an entity
Gains
The process of converting noncash resources and rights into cash or claims to cash
Realization
Enhancing qualitative characteristic of relevance AND faithful representation
Comparability
The process of fomally recording an item in the financial statements of an entity after it has met existing criteria and been subject to cost-benefit constraints and materiality thresholds
Recognition
All changes in net assets of an entity during a period except those resulting from investments by owners and distributions to owners
Comprehensive Income
Inflows or other enhancements of assets of an entity or settlements of its liabilities from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing operations
Revenues
The amount of cash, or its equivalent, that could be obtained by selling an asset in orderly liquidation
Current Market Value
The quality of information that helps users to increase the likelihood of correctly forecasting the outcome of past or present events
Predictive Value
