Overview of US GAAP Flashcards
What does generally accepted accounting principles (GAAP) address?
Recognition, measurement, and disclosure
What body developed generally accepted accounting principles (GAAP)?
The Financial Accounting Standards Board (FASB)
Which agency enforces generally accepted accounting principles (GAAP)?
The Securities and Exchange Commission (SEC).
When are expenses recognized under accrual accounting?
Expenses are recognized when incurred, regardless of the period of cash payment.
When is revenue recognized under accrual accounting?
Revenues are recognized when earned and collection is reasonably assured, regardless of the period of cash collection.
What are the seven key components of the general-purpose external financial report?
- Income statement
- Balance sheet
- Statement of cash flows
- Statement of retained earnings
- Statement of comprehensive income
- Footnote disclosures
- Auditor’s opinion
What is the classification of assets that are in the form of cash, or will be converted into cash, or will be consumed within one year or the operating cycle of the business, whichever is longer?
The classification is current assets.
What is the Accounting Principles Board?
The entity that published 31 opinions, some of which are now part of the Codification.
What are long-term assets?
Assets that are not classified as current assets. Long-term assets are reported on the balance sheet and represent a company’s property, equipment, and other capital assets (reduced by depreciation) expected to be usable for more than one year.
What purpose does the Financial Accounting Standards Board (FASB) Accounting Standards Codification serve?
The FASB Accounting Standards Codification is the sole source of authoritative U.S. generally accepted accounting principles for nongovernmental entities, except for the Securities and Exchange Commission guidance.
What topics does the Financial Accounting Standards Board (FASB) Accounting Standards Codification not include?
- Other comprehensive basis of accounting
- Cash basis
- Income tax basis
- Regulatory accounting principles
An accrual is created when
the economic event occurs first
A deferral account is created when
the cash activity occurs first
An accounting concept that indicates that a item is recorded on the financial statements is
recognition
The economic concept that indicates that cash is paid or received is
realization
What comprises United States generally accepted accounting principles (GAAP)?
The Financial Accounting Standards Board (FASB) Accounting Standards Codification comprise authoritative U.S. GAAP for publicly traded companies. Securities and Exchange Commission (SEC) pronouncements are also GAAP.
What is the American Institute of Certified Public Accountants (AICPA)?
The AICPA is the professional organization for participating CPAs.
What are the first three steps the Financial Accounting Standards Board (FASB) uses when issuing a new accounting standard?
- Considers whether to add a project to its agenda in consultation with the Financial Accounting Foundation (FAF).
- Conducts research.
- Holds a public hearing on the topic.
What does the Securities and Exchange Commission (SEC) do?
It administers the U.S. securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.
What are the final three steps in the standard-setting process?
- Evaluate research and comments from interested parties and issue an exposure draft.
- Solicit additional comments.
- Finalize new accounting guidance and issue
- Accounting Standards Updates (ASUs).
How do user groups influence the outcome of the Financial Accounting Standards Board (FASB) standards?
Users influence standards by providing input during the due process procedure.
What is the role of the Financial Accounting Advisory Council (FASAC)?
The FASAC provides guidance on major policy issues, project priorities, and the formation of task forces.
What is the main purpose of the Securities and Exchange Commission (SEC)?
The main purpose of the SEC is to promote efficient allocation of capital by maintaining open, orderly, and fair securities markets.
What is the Financial Accounting Standards Board (FASB)?
The FASB establishes financial accounting standards for business entities.
What is the role of the Financial Accounting Foundation (FAF)?
The FAF exercises oversight of the Financial Accounting Standards Board (FASB), appoints the members of the FASB, and ensures funding.
