ACC 640 Mid-Term

The SEC officially recognized the FASB when it was formed in 1973 by issuing ______

ASR 150. Its predecessors (the Committee on Accounting Procedure and the Accounting Principals Board) did not have this distinction.

Accounting Principles Board (APB)

(1959-1973), issued opinions, 31 in all. Was established because of criticism of CAP.

Financial Accounting Standards Board

(1973-Present). Developed a conceptual framework comprising seven Statements of Financial Accounting Concepts (SFAS). In 2009, the board launched its FASB Accounting Standards Codification, a major five-year effort to place all authoritative accounting standards for nongovernmental entities in one place. All previous US GAAP standards issued by a standard setter were superseded, and all other accounting literature not included in the Codification is considered non-authoritative. The organization amends the Codification through Accounting Standards Updates.

An item and information about it should meet four fundamental recognition criteria to be recognized and should be recognized when the criteria are met, subject to a cost-benefit constraint and a materiality threshold. Those criteria are:

- Definitions : The item meets the definition of an element of financial statements. - Measurability : It has a relevant attribute measurable with sufficient reliability. - Relevance : The information about it is capable of making a difference in user decisions. - Reliability : The information is representationally faithful, verifiable, and neutral.

Authoritative literature can be

1. Directly on point 2. Relitive analogis authoritative guidance 3. relative interperative guidance 4. knowledge of an expert

Key steps when performing accounting research

1. Examine and evaluate all of the relevant facts and circumstances related to the issue 2. Be absolutely certain that you understand the substance of the accounting issue as it relates to the financial statement 3. Ask yourself if you are able to explain the key points related to the issue or question.

Unqualified opinion

1. Financial statements presented fairly 2. Fair presentation in all material respects 3. Conformity with US GAAP

Examples of audit documentation of accounting research

1. Issue memorandum 2. Summary of significant findings or issues 3. Correspondence on issues 4. Engagement completion document

Interpretive guidance comes from

1. PCAOB 2. AICPA 3. Accounting textbook 4. Experts

Topic 13, Revenue Recognition

1. Topic 13 was originally issued as Staff Accounting Bulletin (SAB) 101 in December 1999. It was updated and re-codified as SAB 104 and issued in December 2003. 2. The SEC staff originally issued SAB 101 due to inconsistent and/or inappropriate application of the revenue recognition criteria ("realized" or "realizable" and "earned") in SFAC No. 5 3. SAB's are issued by the SEC when it wishes to provide additional guidance related to an issue above and beyond what the FASB has provided. 4. SAB 104 includes both general and specific guidance related to revenue recognition

The timing and rationale for the creation of the SEC

1934 with Securities and Exchange Act, during great depression, wanted to retstore faith in big business and government

Committee on Accounting Procedure (CAP)

1939 - 1959, a committee of the AICPA. Issued Accounting Research Bulletins (ARB). The CAP issued 51 ARBs during its existence.

The current source of GAAP in the private sector is the FASB __________________

Accounting Standards Codification

Amendments to the Codification take the form of ___________________

Accounting Standards Updates

The SEC has ______________ to set accounting policies for publicly traded companies and has issued rulings called 1. 2.

Congressional authority 1. Accounting series releases 2. Financial reporting rulings

What public accounting firm audits the Company's financial statements? What type of audit opinion did the auditors issue for the fiscal year ended January 31, 2013? Is there any component of the annual report to shareholders that is designated as "Unaudited"?

Ernst & Young LLP was the public accounting firm who completed the audit of WalMart. The auditors issued an unqualified opinion for the fiscal year ended January 31, 2013. The only part of the annual report to the shareholders designated as "Unaudited" was the Quarterly Financial Date which can be found on page 57 note 16.

The current private sector source is the _____________.

FASB - Financial Accounting Standards Board. The most important body responsible for developing and issuing rules on accounting practices, called Statements of Financial Accounting.

Does the Company use the direct or indirect method to determine its cash flows from operating activities for the fiscal year ended January 31, 2013? How do you know?

Found on page 28 of annual report, the company uses the indirect method to determine the cash flows from operating activities. Because it starts with the net income and makes adjustments for all transitions for non-cash items, and then it adjusted to cash items.

When and where was the Company's 2013 annual shareholders' meeting held?

Found on the front cover. Friday, June 7, 2013, at 7:00 am, Central time at the Bud Walton Arena, University of Arkansas, Fayetteville, Arkansas.

Adverse Opinion

Is rendered when numerous accounts and financial statement relationships are affected by a departure from GAAP. An adverse opinion essentially says that the financial statements are not presented fairly in confomanty with US GAAP

Disclaimer opinion

Is rendered when the scope limitation is so significant an opinion cannot be given

Measurement is

Items currently reported in the financial statements are measured by different attributes (for example, historical cost (Property, Plant & Equipment), current [replacement] cost (Inventory when market is less than cost for lower than cost of market purposes), current market value (Trading & Available in Sale), net realizable value (net accounts receivable (Accounts Receivable - Allowance for Doubtful Accounts), and present value of future cash flows (All long-term debt)), depending on the nature of the item and the relevance and reliability of the attribute measured. The Board expects use of different attributes to continue.

Walmart has the most stores in which country?

Mexico

Name of highest paid Walmart executive

Michael T. Duke

The staff believes that revenue generally is realized or realizable and earned when all of the following criteria are met:

Persuasive evidence of an arrangement exists, Delivery has occurred or services have been rendered, The seller's price to the buyer is fixed or determinable, and Collectibility is reasonably assured.

List the eight proposals included in the Proxy Statement that were to be voted on by the shareholders. Of the four shareholder proposals included in the Proxy Statement, how many did the Company's Board of Directors recommend that the shareholders vote: (a) for the proposal and (b) against the proposal?

Proposal No. 1 - Election of Directors Proposal No. 2 - Ratification of Independent Accountants Proposal No. 3 - Advisory Vote to Approve Named Executive Officer Compensation Proposal No. 4 - Approval of the Management Incentive Plan, as Amdended Proposal No. 5 - Special Shareowner Meeting Right Proposal No. 6 - Equity Retention Requirement Proposal No. 7 - Independent Chairman Proposal No. 8 - Request for Annual Report on Recoupment of Executive Pay The Board recommends a vote AGAINST each of the four shareholder proposals, which were Proposals Nos. 5-8

Recognition is

Recognition is the process of formally incorporating an item into the financial statements of an entity as an asset, liability, revenue, expense, or the like. A recognized item is depicted in both words and numbers, with the amount included in the statement totals.

At January 31, 2013 who was the Chairman of the Board of Directors for the Company? At that date how long had he held his position? At that date how old was he?

S. Robson Walton, since 1992, 68 years old

The current public sector source is the _____________.

SEC - Securities and Exchange Commission. An agency of the federal government set up by the U.S. Congress to protect the public by regulating the issuing, buying, and selling of stocks and bonds. This agency has the legal power to set and enforce accounting practices for firms whose securities are sold to the general public.

AICPA

Sets ethical standards for the profession and U.S. auditing standards for audits of private companies, non-profit organizations, federal, state, and local government and it is their duty is to promulgate auditing, attestation, and quality control standards related to the preparation and issuance of audit reports for private entities

In situations in which the SEC staff believes additional guidance is needed on an accounting subject above and beyond what the FASB has provided, it will issue _____________

Staff Accounting Bullitens

The only source of authoritative guidance comes from

Standard setters

The most significant component of the Form 10-K

The Annual Report to Shareholders

How does the Company recognize revenue from membership fees? How does the Company recognize revenue from shopping cards? (Note: you may cut-and-paste your answer if you choose).

The Company recognizes membership fee revenue both in the United States and internationally over the term of the membership, which is typically 12 months. Membership fee revenue is included in membership and other income in the Company's Consolidated Statements of Income. The deferred membership fee is included in accrued liabilities in the Company's Consolidated Balance Sheets.

. What was the Company's effective income tax rate for the fiscal year ending January 31, 2013?

The Company's effective income tax rate for the fiscal year ending January 31, 2013 is 31%,

To what number should the "Cash and cash equivalents at end of year" of $7,781 in the Consolidated Statements of Cash Flows for the fiscal year ended January 31, 2013 tie? Does it?

The numbers in "Cash and cash equivalents at end of year" tie back to the balance sheet "Cash and cash equivalents" right under Current Assets.

What are the two distinct reports issued by the Independent Registered Public Accounting Firm that are found in the Annual Report to Shareholders?

The two distinct reports can be found on pages 58 and 59. They issued the Report of Independent Registered Public Accounting Firm and The Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Qualified Opinion

There is a departure from GAAP that does not necessitate an adverse opinion. The departure from GAAP must be mentioned in the opinion sentence. A minor scope limitation could also result in a qualified opinion

Format of Codification

Topic | Subtopic | Section | Paragraph

Walmarts operations are made up three "reportable business segments". What are they?

Walmart U.S., Walmart International and Sam's Club

Allen & Melton (A&M) Accounting Issue Memorandum

We discovered that A&M has an accounting policy that results in only direct manufacturing labor and direct material costs being included in the cost of manufactured inventory. Based on this directly on point literature, it is clear that A&M's accounting policy related to the treatment of manufacturing overhead costs is not in accordance with GAAP. In other words, the authoritative literature cited above indicates that it is not acceptable to exclude "all overheads from inventory costs" which is in direct contradiction with A&M's accounting policy to treat all manufacturing overhead costs as period expenses

PCAOB

auditing standards are applicable to audits of public companies. They adopted AICPA standards as interim standards until it could develop its own

The conceptual framework issued by the FASB currently includes _______________________

eight statements of financial accounting concepts

Audit documentation must contain sufficient information to enable an

experienced auditor, having no connection with the engagement 1. to understand the nature, timing, extent, and results of procedures performed, evidence obtained, and conclusions reached, and 2. To determine who performed the work and the date such work was completed as well as the person who reviewed the work and the date of such review

The experienced auditor

has a reasonable understanding of audit activities and has studied the company's industry as well as the accounting and auditing issues relevant to the industry

Prospectus

is a disclosure document that describes a financial security for potential buyers. It commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information. In the context of an individual securities offering, such as an initial public offering, a prospectus is distributed by underwriters or brokerages to potential investors.

Form 10-Q

is a quarterly report mandated by the United States federal Securities and Exchange Commission, to be filed by publicly traded corporations.

Proxy Statement

is a statement required of a firm when soliciting shareholder votes. This statement is filed in advance of the annual meeting.

Form 8-K

is a very broad form used to notify investors of any material event that is important to shareholders or the United States Securities and Exchange Commission. This is one of the most common types of forms filed with the SEC.

Form 10-K

is an annual report required by the U.S. Securities and Exchange Commission (SEC), that gives a comprehensive summary of a company's financial performance.

Gap in GAAP

there are some transactions that the literature doesn't cover, describes grey areas in financial accounting