SEC and IASB Flashcards
What purpose does Accounting and Auditing Enforcement Releases (AAER) serve?
Report the enforcement actions taken against accountants.
Define “Staff Accounting Bulletins (SAB)”.
Bulletins that provide the Security and Exchange Commission’s current position on technical issues.
Define “Financial Reporting Releases (FRR)”.
Formal pronouncements that rank the highest in authority for public companies.
When the Securities and Exchange Commission (SEC) finds an accounting irregularity, what happens?
The SEC sends a “deficiency” letter to a registrant when an accounting irregularity is found.
Does the Securities and Exchange Commission (SEC) have the authority to penalize firms when financial statements are not in accordance with Generally Accepted Accounting Principles?
Yes, they may penalize firms.
How many divisions does the Securities and Exchange Commission (SEC) have?
Four (The Division of Corporation Finance, The Division of Enforcement, The Division of Trading and Markets, and The Division of Investment Management).
What does the Securities and Exchange Commission (SEC) strive to do?
Ensure that there is adequate information in the public domain before a company issues or trades securities.
Does the Securities and Exchange Commission (SEC) have legal authority to prescribe accounting standards to public companies?
Yes, it has that authority.
Financial Reporting Releases are the formal pronouncements issued by the SEC that must be adhered to by public companies.
TRUE
The SEC is not a member of the International Organization of Securities Commissions (IOSCO).
FALSE
Division of Accountants is not a division of the SEC.
TRUE
The SEC has no enforcement power.
FALSE
The Securities and Exchange Commission (SEC) has the legal authority to prescribe accounting standards, but has delegated standard setting to the private sector.
TRUE
Public companies must adhere to SEC pronouncements.
TRUE
A foreign private issuer would not have the following characteristic:
The foreign issuer is a foreign government.
TRUE
The SEC does not acknowledge or accept financial statements in compliance with IASB approved IFRS.
FALSE
Does the Sarbanes-Oxley Act allow auditors to complete non-audit services for clients?
No, the Sarbanes-Oxley Act does not allow this.
What law prohibits the bribing of foreign officials?
The Foreign Corrupt Practices Act of 1977
What information does the 8-K provide?
Significant events affecting the company.
Within how many days after the end of the quarter does a company need to file the 10-Q?
Forty days for large accelerated filers and accelerated filers; forty-five days for non-accelerated filers.
What information does Management Discussion & Analysis (MD&A) cover?
The firm’s financial condition, changes in financial condition, results of operations, liquidity, capital resources and operations, and indications in trends, significant events, and uncertainties.
What information does Management Discussion & Analysis (MD&A) provide?
A discussion of important aspects of the firm from the viewpoint of management.
Within how many days after the fiscal year end of a large accelerated filer does a 10-K need to be filed?
Sixty days.
What are the steps in the offering process?
Issuer, underwriter, dealer, public.
How many years of selected financial data are required by the Securities and Exchange Commission (SEC)?
Five years are required.
How many years of cash flow data are required by the Securities and Exchange Commission (SEC)?
Three years are required.
How many years of income statement data are required by the Securities and Exchange Commission (SEC)?
Three years are required.
How many years of balance sheet data are required by the Securities and Exchange Commission (SEC)?
Two years are required.
What does registration with the Securities and Exchange Commission (SEC) require?
Extensive disclosures about the company, management, and the intended use of the proceeds from the issue.
Where are the Securities and Exchange Commission (SEC) formal rules found?
The Code of Federal Regulations.
What does the Securities Act of 1934 do?
Regulates the trading of securities after they are issued and requires periodic reporting.
2 years balance sheets, 3 years income statement, statements of cash flows, and shareholders’ equity are the audited financial statements provided upon initial registration of a security.
TRUE
The 10-k for a large accelerated filer is required to be filed within 60 days of the fiscal year end.
TRUE
Regulation S-X requires reporting on disagreements with accountants.
FALSE
Audited financial information is included in Part II, Item 8 of Form 10-k.
TRUE
10-k is the form required for annual filing of a public company.
TRUE
Initial registration of securities is typically done via Form S-1.
TRUE
Regulation S-K governs non-financial statement disclosures in Form 10-K.
TRUE
Regulation S-X governs form and content of financial statements.
TRUE
Notes, debentures, or evidence of indebtedness would not be considered a security that requires registration.
FALSE
The 10-Q for a large accelerated filer is required to be filed within 45 days of the fiscal year end.
FALSE
The 1933 Securities Act governs the registration and trading of all public securities.
FALSE
Management’s Discussion and Analysis (MD&A) is governed by Regulation S-X.
FALSE
What does the International Financial Reporting Standards (IFRS) Interpretations Committee do?
Committee serves a similar role to the FASB’s Emerging Issues Task Force, except that the IFRS Interpretations Committee’s pronouncements (Interpretations) are reviewed by the IASB before they are issued. The IFRS Interpretations Committee reviews issues arising in the context of IFRSs and issues Interpretations of those issues.
What does the International Financial Reporting Standards (IFRS) Advisory Council do?
The Council advises the IASB on priorities and the views of interested organizations on major projects, as well as the benefits and costs of proposed standards.
How long are the terms for Board Members of the International Accounting Standards Board (IASB)?
Five years, renewable one term.
How long are the terms for the trustees of the International Financial Reporting Standards (IFRS) Foundation?
Three years, with one renewable term.
Who appoints members of the International Accounting Standards Board (IASB), International Financial Reporting Standards (IFRS) Advisory Council, and IFRS Interpretations Committee?
The IFRS Foundation.
How many members does the International Accounting Standards Board (IASB) have?
Sixteen.
What is IOSCO?
It is the International Organization of Securities Commissions. IOSCO promotes high standards of regulation to ensure transparent and efficient capital markets.
Does the International Accounting Standards Board (IASB) have enforcement power over companies?
No, it does not have enforcement power.
What is the fourth objective of the International Financial Reporting Standards (IFRS) Foundation?
To promote and facilitate adoption of IFRs issued by the International Accounting Standards Board (IASB), through the convergence of national accounting standards IFRS.
What is the third objective of the International Financial Reporting Standards (IFRS) Foundation?
To take into account the special needs of a range of sizes and types of entities in diverse economic settings.
What is the second objective of the International Financial Reporting Standards (IFRS) Foundation?
To promote the use and rigorous application of those standards.
What is the first objective of the International Financial Reporting Standards (IFRS) Foundation?
To develop in the public interest a single set of high-quality, understandable enforceable and globally accepted financial reporting standards. These standards require high quality, transparent, and comparable information in financial reporting to help make economic decisions.
What year did the International Accounting Standards Board (IASB) begin taking control of standard setting?
2001 (April).
From what entity did the International Accounting Standards Board (IASB) evolve?
The IASB, formed in 2001, evolved from the International Accounting Standards Committee (IASC), which was established in 1973.
The IFRS Interpretations Committee serves a similar role as the Emerging Issues Task Force.
TRUE
The IASB has enforcement power.
FALSE
The IASB Board members are elected into their positions.
FALSE
International Standards Committee (IASC) was the organization that was the predecessor to the IASB.
TRUE
The IFRS Foundation is the parent to the IASB.
TRUE
What did the Securities and Exchange Commission (SEC) eliminate for foreign companies listed in the United States?
A reconciliation of earnings and equity to U.S. Generally Accepted Accounting Principles (Form 20-F) in their financial statements.
List the steps of developing International Accounting Standards.
- Add item to agenda;
- Discuss issue;
- Publish discussion paper if topic is difficult;
- Prepare and vote on exposure draft;
- Issue the Exposure Draft;
- Analyze the comments on the exposure draft;
- Debate the issue at hand.
List some examples of simplified recognition and measurement for Small and Medium-sized Entities (SMEs) in International Financial Reporting Standards (IFRS)?
Goodwill is amortized; all R&D is expensed, categories of investments reduced, less prior year data required for first- time adoption.
What are some omitted topics for Small and Medium-sized Entities (SMEs) in International Financial Reporting Standards (IFRS)?
Earnings Per Share, Interim Financial Reporting, Segment Reporting.
When can revisions happen for Small and Medium-sized Entities (SMEs) in International Financial Reporting Standards (IFRS)?
Revisions for SMEs standards happen every three years at most.
What is simplified for Small and Medium-sized Entities (SMEs) in International Financial Reporting Standards (IFRS)?
Topics that are irrelevant are eliminated, recognition and measurement aspects simplified, disclosures reduced to 10% of those in regular IFRS
Is IFRS more rules based or principle based?
Principle based.
Under IFRS, if no standards exist on an accounting issue, what should companies use?
The definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework.
What is the highest level of International GAAP?
IFRS.
U.S. GAAP requires more professional judgment than application of IASB Standards.
FALSE
The due process for setting international accounting standards is very similar to the U.S. approach for setting U.S. standards.
TRUE
International Financial Reporting Standards (IFRS) is the highest authority in the IFRS hierarchy.
TRUE
SME reporting under IFRS requires more extensive disclosures.
FALSE
A Small and Medium-sized (SME) company can apply the IFRS SME standards and be publicly traded.
FALSE
What are the underlying assumptions of the International Accounting Standards Board (IASB) framework?
The financial statements are prepared on the accrual basis and the entity is a going concern.
Does the International Accounting Standards Board (IASB) framework include losses for the term “expense?”
Yes, it includes such losses.
What elements are considered income under the Financial Accounting Standards Board (FASB) framework?
“Revenue” and “gains” as separate elements.
What comprises income under the International Accounting Standards Board (IASB) framework?
Includes both revenues and gains.
True or False: Income may be realized or unrealized.
True.
What is meant by a “reliable measurement?”
Measurement in which a reasonable estimate is made.
When do you recognize an element in the International Accounting Standards Board (IASB) framework?
When it is probable that there is a future economic benefit and the item has a cost or value that can be measured with reliability.
What elements of the Financial Accounting Standards Board (FASB) framework are not included in the International Accounting Standards Board (IASB) framework?
Investments by owners, distributions to owners, comprehensive income, gains, losses.
What are the five elements in the International Accounting Standards Board (IASB) framework?
- Assets;
- Liabilities;
- Equity;
- Income;
- Expenses.
What will be the underlying conceptual support for future principles-based accounting standards?
Developing a common framework.
What are some of the purposes of the International Accounting Standards Board (IASB) framework?
Assist the Board to develop new International Accounting Standards (IASs); promote harmonization of standards; and assist, provide information to interested parties.
True or False: The International Accounting Standards Board (IASB) framework should only apply to public companies, not private corporations.
False. The IASB Framework should apply to both public and private companies.
The U.S. Framework identifies accrual accounting as a basic assumption.
FALSE
The U.S. Framework and International Framework both identify that the objective of financial reporting is to aid the external users decision making.
TRUE
The IASB Framework treats expenses and losses as an expense, where the U.S. Framework treats expenses and losses as separate elements.
TRUE
To provide guidance in accounting for specific transactions, events or conditions is not a purpose of the IASB Framework.
TRUE
The IASB Framework identifies accrual accounting as a basic assumption.
TRUE
