Midterm Study CH1 Flashcards
when a current asset has a fair value higher than historical cost, must report historical cost to respect
historical cost principle
The SEC developes accounting standards for the FASB (t/f)
false
IASB purpose
promote uniform accounting standards globally
gaap is influenced by SEC (t/f)
true
gaap doesn’t have substantial authoritative support (t/f)
false
Why did the AICPA create the Accounting Principles Board
previous one lacked a structured set of accounting principles
financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management (t/f)
false
ways financial accounting is used
- decide when to invest
- buy/sell/hold equity
- evaluate borrowing capacity
how does accounting help the capital allocation process draw investment capital
providing timely, relevant info
the principal ways a company communicates financial info to external
financial statements
assumption/principle requires all info strong enough to affect choices of reasonably informed users should be reported
full dislcosure
FASB issues which: accounting standards updates, financial accounting concepts, accounting research bulletins
the first two
SEC approves each GAAP
false
statement of financial accounting concepts purpose
form conceptual framework to problem solve
if LIFO was used last period, it should be used current band future because of
consistency
FASB codification - new GAAP (t/f)
false
standard setting FASB are public so…
interested parties can make opinions and host public hearings
SEC appointed Comittee on Accounting Procedure
false
earning manipulation is an?…
ethical concern
revenue recognition
recognize when obligation satisfied
GAAP is influenced by political action
true
why is accrual accounting used
gives better indication of ability to generate cash flows over time than cash basis
objective of financial accounting
provide information useful to present and potential investors, lenders, etc.
major difference between FASB and APB is
all FASB members are fully remunerated, serve full time, and are independent of any company/institute
