Intro Flashcards
What are the 3 aspect characteristics of financial reporting under GAAP? And define each.
1) Recognition: when something is recorded on F/S
2) Measurement: how it it is recorded on the F/S
3) Disclosure: anything not on F/S but may be recorded in footnotes
What is the primary standard setting body in the U.S. and what are the 2 other organizations that support it?
1) The Financial Accounting Standards Board (FASB): ESTABLISHES GAAP
a) FASAC: provides guidance on policy, priorities, etc.
b) FAF: provides funding, appoints board members & advisory council
How many full time members does the FASB have?
7
What are the goals of the FASB?
Improve usefulness of financial reporting
address deficiencies
promote international convergence
What are the 6 steps of the standard setting process?
1) Add project to agenda
2) Conduct research & issue discussion memorandum
3) Public Hearing
4) Issues debated & Exposure Draft
5) Modification to Exposure Draft
6) Finalize & issue ASU (Accounting standards update)
a) ASUs become part of FASB codification
What is the SEC and what is their primary role?
Securities & Exchange Comissions
Established 1933
Has authority to establish GAAP but relinquished to private sector (currently FASB)
Primary role: enforce compliance w/ accounting rules for all publicly held companies
What is the AICPA and what is their primary role?
American Institute of Certified Public Accountants
Provides substantial input to Standard Setting process
What is authoritative GAAP and what comprises it?
GAAP = the authoritative literature set by the FASB through codification system
It is comprised of:
- FASB accounting standards codification (compilation of pronouncements issued by FASB & predecessors)
- SEC guidance considered authority for public
-
What comprises non-authoritative GAAP?
FASB statements
AICPA Issue papers
IFRS statements
What is the difference between Accruals and Deferrals?
An Accrual follows the pattern: Economic Even, Accrual Account, Cash
A Deferral follows the pattern of: Cash, Accrual Account, Economic Even
What is the purpose of the Statement of Comprehensive Income?
Reports NON-owner changes to equity over a period of time
Includes those changes that by pass the income statement
eg. unrealized g/l on investments in AFS securities
certain pension adjustments
What is the purpose of the Statement of Stockholder’s Equity?
Reports changes related to OWNER’s equity over a period of time
Presented in order of Permanence
1) Contributed Capital shown first
2) Retained Earnings shown last
What is the purpose of the Statement of Cash Flows?
Reports changes in cash over a period of time
3 parts:
1) Operating: income statement transactions, operations of the company
2) Investing: long term assets & investments
3) Financing: liabilities & owner’s equity
What are the goals of the GAAP codification? And why did the FASB develop an online research tool?
1) Simplify structure & accessibility of GAAP
2) Place all authoritative literature in one place
3) Reduce time & effort to research an issue
4) Reduce risk of noncompliance
5) Facilitate & update GAAP
6) Assist w/ IFRS convergence
What is the structure of the codification?
I. Areas
a. ) Topics
i. ) Subtopics
1) Sections
a. ) Subsections
i. ) Paragraphs
