ACFN 325

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

Accounting Standards Updates and Financial Accounting Concepts

2 Major types of pronouncements issued by FASB

SEC, AICPA, and FASB

3 Organizations that Develop GAAP

Free From Error

Meaning the information is accurate

Neutrality

Meaning the information is unbiased

GAAP

More rule based, driven by investors and creditors

Multinational corporations, Mergers and acquisitions, information technology, financial markets

Need for more than one set of international accounting standards

Debit Cash Debit Discount on Notes Payable Credit NoteDebit Cash Debit Discount on Notes Payable Credit Notes Payable Debit Interest Expense Credit Discount on Notes Payables Payable Debit Interest Expense Credit Discount on Notes Payable

Notes Issued at Discount (Zero Interest Method)

1st level

Objective of financial reporting (purpose of financial reporting/Why)

Expenses

Outflows or other using up of assets or incurrences of liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations.

Public Company Accounting Oversight Board

PCAOB

Assets

Probable future economic benefits owned by the entity as a result of past transactions

What does EITF do

Provides implementation guidance within the framework of the Codification to reduce diversity in practice on a timely basis

2nd level

Qualitative characteristics and elements of financial statements (Bridge between Why and How)

Equity

Residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest.

Operating

Revenues and Expenses are classified both as ___________

Securities and Exchange Commission

SEC

Managerial Accounting

The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaluate a company's operations.

What does FINREC do?

They are authorized to make public statements on behalf of AICPA on financial reporting matters

Proprietary Perspective

a perspective that financial reporting should be focused only on the needs of shareholders

Internal Controls

a system of checks and balances designed to prevent and detect fraud and errors

Accounting Standards Updates

amend the accounting standards codification

Entity Perspective

companies are viewed as separate and distinct from their owners

Comparability

companies record and report information in a similar manner

Accrual Basis Accounting

ensures that a company records events that change its financial statements in the periods in which the events occur, rather than only in the periods in which it receives or pays cash

Conceptual Framework

establishes the concepts that underlie financial reporting

Decision Usefulness

financial reporting that provides useful info for making decisions

Verifiability

independent measurers, using the same methods, obtain similar results

Timeliness

information is available before it loses its relevance

Relevance

information that is capable of making a difference in a decision

CRS

online real-time database that provides easy access to the codification.

Liabilities

probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

Faithful Representation

the numbers and descriptions match what really existed or happened

Capital Allocation

the process of determining how and at what cost money is allocated among competing interests

Financial Accounting

the process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties

Financial Reporting (Objective)

to provide financial information about the reporting entity that is USEFUL to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entity

Expectations Gap

what the public thinks accountants should do and what accountants think they can do

Committee on Accounting Procedure

CAP

Accounting Research Bulletins

CAP created

Comparability (Consistency), Verifiability, Timeliness, Understandability

Categories that make up Enhancing Qualities

Complete, Neutral, Free from Error

Categories that make up faithful representation

Predictive Value, Confirmatory Value, Materiality

Categories that make up relevance

What does FASAC do

Consults with FASB on major policies and technical issues, and also helps select task force members

Emerging Issues Task Force

EITF

What does FASB do

Establishes and improves standards of financial accounting and reporting for the guidance and education of the public (auditors, issuers, and other users)

Comprehensive Income

Change in equity (net assets) of an entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Losses

Decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from expenses or distributions to owners.

Distributions to Owners

Decreases in net assets of a particular enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners. Distributions to owners decrease ownership interests (or equity) in an enterprise.

Role of IASB

Develop Financial statements

What does the AICPA do?

Develop and contribute to GAAP

What does the SEC do?

Develops and standardizes financial information presented to stockholders

What does the IOSCO do?

Ensures global markets are efficient and effective

Financial Accounting Foundation

FAF

Financial Accounting Standards Advisory Council

FASAC

Financial Accounting Standards Board

FASB

Nonfinancial measurements, Forward-Looking Information, Soft Assets, Timeliness, Understandability, International Accounting Standards

Financial Reporting Issues

Generally Accepted Accounting Principles

GAAP

political, logic

GAAP is seen as both __________ action and _________ product

Changes in Equity (Comprehensive Income)

Gains and Losses from operating and nonoperatinig activities

What did APB do?

Goal was to advance accounting principles (through writing), determine appropriate practices, and limit errors)

International Accounting Standards Board

IASB

Gains

Increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from revenues or investments by owners.

Investments by Owners

Increases in net assets of a particular enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests (or equity) in it. Assets are most commonly received as investments by owners, but that which is received may also include services or satisfaction or conversion of liabilities of the enterprise.

Revenues

Inflows or other enhancements of assets of an entity or settlements of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.

Materiality

Information is material if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information.

Predictive Value

Information is useful in predicting the future

Confirmatory Value

Information validates or refutes expectations based on previous evaluations

ethical

It is important to be ________ in accounting

What did CAP do?

Looked at Accounting Accounting Research Bulletins to solve problems (Dissolved in 1959)

General-Purpose Financial Statements

provide financial reporting information to a wide variety of users

Codification

provides in one place all the authoritative literature related to a particular topic

Understandability

reasonably informed users should be able to comprehend the information that is clearly classified and presented

Financial Statements

statements prepared to communicate the results of business activities to interested users

IASCF, IASB, SAC, IFRIIC

IASB is composed of 4 organizations

International Financial Reporting Standards

IFRS

Industrial Organization of Securities Committee

IOSCO

3rd level

Identifies recognition, measurement, and disclosure concepts to establish and apply accounting standards and concepts (How)

Sarbanes-Oxley Act

Increased resources for the SEC to combat fraud and curb poor reporting practices

Role of IFRIC

Interpretations that cover issues not specifically dealt with IFRS and issues where unsatisfactory or conflicting interpretations have developed

balance sheet, income statement, statement of cash flows, statement of stockholder's equity

4 Financial Statements

What is GAAP?

A common set of standards, principles, and procedures which have substantial authoritative support and have been accepted as appropriate because of universal application.

Statements of Financial Accounting Concepts

A series of pronouncements issued by the FASB with the purpose of setting forth fundamental objectives and concepts that the FASB will use in developing future standards of financial accounting and reporting.

American Institute of Certified Public Accountants

AICPA

Accounting Principles Board

APB

Complete

All necessary information must be given

Consistency

Another type of comparability and means the company uses the same accounting methods from period to period

Assets, Liabilities, Equity, Investments by Owners, Distributions to Owners, Comprehensive Income, Revenues, Expenses, Gains, Losses

Basic Elements of Financial Statements

What is IFRS?

It is a widely accepted set of accounting principles that are in use outside the USA in most countries. It has largely replaced the individual country GAAP that existed in the countries that now use IFRS.

Financial Reporting Executive Committee

FinREC

Relevance, Faithful representation

Fundamental Qualities consists of _________ and __________

Role of IASCF

Select members of IASB and SAC, funds activities, oversees IASB's activities

What does the FAF do?

Selects members of FASB and the Advisory Council, funds their activities, and generally oversees FASB's activities

What did the Sarbanes-Oxley Act do?

Set Generally Accepted Auditing Standards, oversight for auditing practices

What does IASB do

Set International accounting standards

Conceptual Framework for Financial Reporting

Sets objectives for developing future standards of reporting

IFRS

Simpler and more flexible, driven by tax authorities or central government planners

APB Opinions

The APB's official pronouncements issued from 1959 through 1973 which were intended to be based mainly on research studies and be supported by reasons and analysis.

fundamental qualities, enhanced qualities

2nd Level consists of ______________ and ________________

What does PCAOB do?

The _________ establishes auditing and related professional practice standards to be used in the preparation and issuance of audit reports for issuers.

Auditing Standards Board

The arm of the AICPA that had been responsible for developing auditing standards

Wheat Committee

The Study Group on Establishment of Accounting Principles, chaired by Francis Wheat, that examined the organization and operation of the Accounting Principles Board and determined the changes needed to attain better productivity and more timely correction of accounting abuses. The Study Group submitted its recommendations to the AICPA Council in the spring of 1972, which adopted the recommendations in total and implemented them by early 1973.


Ensembles d'études connexes

World History & Geography Final Exam (Terms)

View Set

Spring 2022 Managment 3000 Quiz Answers

View Set

Unit 6 Progress Check: MCQ Part A

View Set

periodic table of elements 30-60

View Set