part 1.FASB standard setting Flashcards
organizations involved in developing GAAP
. FASB
. SEC
. AICPA
.PCC
GAAP addresses
. recognition
. measurement
. disclosure
accounting standard setting mechanism
. FASB
. FAF
. FASAC
mission of the FASB
- improve usefulness of financial reporting
- maintain current accounting standards
- promptly address deficiency in accounting standards
- promote international covergence of accounting standards
- improve the understanding of the nature and purpose of information in f/s
FASB
- private entity
- 7 full time members - 5 years term
- subject to FAF oversight and policies
- members can’t have employement or invest ties with other entities
- members not need to be CPA
FASB process to issue a new standard
- considers whether to add project to agenda
- conduct research on topic
- issues a discussion memo
- holds public hearings on topic
- evaluate the research and issues an exposure draft
- solicits additional comments and modifies exposure draft
- finalize the new accounting guidance
- issues an accounting standard update
FASB emerging issue task force
they act as a filter for FASB allowing FASB to focus on more important issues
negative economic consequence
is often an argument of an interested party. a common argument against a proposed standard is that it will cause earnings to decline thus reducing the firms ability to raise capital
the role of FAF
. oversight of FASB
. appoints FASB members
. ensure FASB funding
FASB
establishes financial accounting standards for business entities
what sec do?
administers u.s. securities laws
what is the role of FASAC?
provides guidance on major policy issues, project priorities and formation of task force
authoritative GAAP
the FASB accounting standards codification is the sole source of authoritative U.S. GAAP for nongovernmental entities, except for SEC guidance
accounting and financial reporting practices not included in the codification are not authoritative
the codification does not change GAAP
but rather provides accounting standards in a newly structure electronic form. materials are organized by major areas and topic
the codification does not include guidance
for non GAAP matters including: . OCBOA . cash basis . income tax basis . regulatory accounting principles
if guidance for transactions is not specified in the codification
authoritative GAAP for similar transactions should be considered before considering non authoritative GAAP
sources of non authoritative GAAP
FASB concept statements
AICPA issues papers
IFRS and others
the codification does not include
SEC content related to management discussion and analysis and other items appearing outside the f/s
the accrual and differal accounts
are simply holding the revenue or expense amounts on the balance sheet until they can be recognized in the income statement
deffered: cash first
accruals: cash second
prior period adjustments
which are the effects of corrections of errors affecting prior year net income are shown on the statement of retained earnings as adjustments to the begining balance of retained earnings in the year the error is discovered.
items not included in the income statement but instead are included in other comprehensive income
. unrealized gains and losses on investments in securities available for sale
. certain pension costs adjustments
. foreign currency translation adjustment
income statement
revenues - expenses
measures the performance of the firm. applies all inclusive approach.
balance sheet measurement basis
. property plant and equipment: historical cost and depreciated/amortized historical cost.
. receivables: net realizable value
. inventory: lower of cost or market
. investments in marketable securities: market value
. liabilities: present value
, owner’s equity: historical value of cash inflows and residual valuation
, short term payables: historical cost
. warranty obligations: net realizable value
, long term receivables: present value of future cash flows
