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In the United States the-------------------------------------has the Legal authory to establish U.S. generally accepted accounting principles.
Securities and Exchange Commission ( SEC)
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While the SEC has the legal authory to establish U.S. GAAP it has allowed the -------------------------------to establish GAAP and ------------------------.
accounting profession/self-regulate
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The ----------------was established by the Secutities Exchange Act of 1934
SEC
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All companies that issue securities in the United States are subject to ------------rules and regulations.
SEC
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The SEC issues 5 releases and reports.
Financial Reporting Releases (FRR)
Accounting Series Releases (ASR)
Interpretative Releases (IR)
Staff Accounting Bulletins (SAB)
SEC Observer Comments
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SEC stands for?
Securities and Exchange Comission
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FRR stands for?
Financial Reporting Releases
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ASR stands for?
Accounting Series Releases.
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IR stands for?
Interpretative Releases
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SAB stands for?
Staff Accounting Bulletins
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FASB stands for?
Financial Accounting Standards Board
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A independent full-time organization called the ------------------------------------------was established to determine GAAP
Financial Accounting Standards Board
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FASB issues the following
Statements of Financial Accounting Standards (SFAS)
FASB Interpretations (FIN)
FASB Technical Bulletins (FTB)
Emerging Issues Task Force Statements (EITF)
FASB Staff Positions
FASB Implementation Guides
Statements of Financial Accounting Concepts (SFAC)
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SFAS stands for?
Statements of Financial Accounting Standards
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FIN stands for?
FASB Interpretations
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FTB stands for?
FASB Technical Bulletins
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EITF stands for?
Emerging Issues Task Faorce Statements
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SFAC stands for?
Statements of Financial Accounting Concepts
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The FASB has ------------ full time members who serve for -------- year terms and may be reappointed to ------------additional term(s). The Board members must --------------------------------------------------------before joining the Board.
7 / 5/ 1/ sever connections with firms or institutions
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The -----------------------------------------------------------is the single source of authoritative nongovermental U.S. GAAP.
FASB Accounting STandards Codification
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Accounting and financial reporting practices not included in the --------------------------------------------are not GAAP
FASB Accounting STandards Codification
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AICPA Stands for?
American Institute of Certified Public Accountants
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ASC stands for?
Accounting STandards Codification
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Proposed FASB Amendments to the ------------ are issued for public comment inthe form of -------------------------. A ------------------------ of the Board members is repquired to approve an ---------------------------- for issuance. At the end of the -------------------------------------------------, the FASB staff analyzes and studies all comment letters and position papers and then the Board redeliberates on the issue. When the Board is satisfied that all reasonable alternatives have been adequately considered , the FASB staff prepares an ---------------------------------------------------------- for Board consideration. A majority vote of the Board members is required to amend the ---------------------------.
ASC / Exposure Drafts / majority vote / Exposure Draft / Exposure Draft public comment period / Accounting Standards Update / ASC
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Accounting Standards Updates are------------------------------ but instead provide ------------------------------------- update the Codification and describe the basis for ------------------------------------------------------------in the Codification.
not authoritative literature / background information / conclusions on changes
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IASB stands for?
International Accounting STandards Board
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IFRS stands for?
International Financial Reporting Standards
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What is the purpose of the IASB?
To develop a single set of high quality global accounting standards
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IFRIC stands for?
International Financial Reporting Interpretations Committee
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What does IFRIC do?
provides guidance on newly identified financial reporting issues not addressed in the IFRSs and assists the IASB in achieving international convergence of accounting standards.
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IAS stands for?
International Accounting STandards
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The IASB issues ------------------------------- and related documents.
IFRSs
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When the IASB was created it adopted the ---------------------------------.
IAS
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The IASB generally publishes a --------------------- as its first publication on a major new topic, although ----------------------- are not required. After receiving and reviewing comments on the -----------------------, the IASB staff prepares an ---------------------------. The publication of an --------------------------------------for public comment is required. At least ----------- members of the IASB must approve an -------------------------------------------- for issuance. At the end of the ------------------------------------public comment period, the IASB analyzes and studies all comment letters and position papers and re-deliberates on the issue. A IFRS may be issued and must be approved by at least ------------------ members of the IASB.
Discussion paper / disscussion paper / disscussion paper / Exposure draft / Exposure draft / 9 / Expososure draft / Exposure draft / 9
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The IASB is developing the------------------------------------------------------in a joint project with the FASB. The purpose of the project is to converge and improve the FASB and IASB financial reporting frameworks.
Conceptual Framework for Finanial Reporting(Conceptual Framework)
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Under IFRS entities are directed to refer to and consider the applicabilty of the ---------------------------------------------------------------------- when developing accounting policies in the absence of a standard or interpretation that specifically applies to an item.
Under U.S. GAAP the ------------------------------------cannot be applied to specific accounting issues.
Conceptual Framework for Finacial Reporting (Conceptual Framework)
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What is the goal of international convergenance of accounting standards?
a single set of high quality internatinal accounting standards that companies can use for both domestic and cross border fiancial reporting.
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The FASB has created a conceptual framework( set forth in pronoucements called ----------------------------) that serves as a basis for all FASB pronuncements.
Statemetns of Financial Accounting Concepts
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The SFAC are not------------------ but they --------------------------------for business and nonbusiness enterprises.
GAAP / Basis for financial accounting concepts
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What is the objective of general purpose financial reporting?
to provide financial information about the reporting entity that is useful tothe primary users.
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Who are the primary users of general purpose financial reporting?
existing and potential investors, lenders, and other creditors.
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Who may use general purpose finacial reporting information but are not considered primary users?
regulators, members of the public who are not investors, other lenders and creditors.
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Information in the general purpose financial reports include the following
informaiton about resources of the entitiy
- the claims agianst the entity
- how efficiently and effectively the entity management and governing board have discharged their responsibilities to use the entrity resources.
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Financial informaitn should be presented using the -------------------------------------------------
accrual basis of accounting
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Existing and potential investors, lenders, and other creditors use financial information to ------------------------------------------------------------------------------------
assess the reporting entitys prospects for future net cash inflows to the entity.
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What are the Qualitative Characteristics of useful financial information?
Must have relevance and faithful representation
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Qualitative characteristics of usefull financial informaiton are characteristics that help users becouse they are useful in --------------------------------------------------------------
making decisions about the reporting entity based on financial information
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In fundamental Qualitative Characteristics, what 2 characteristics must be present for the finacial information to be useful
Relevance and Faithful representation
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For information to be relevant is must be capable of -------------------------
makeing a differance in the decisions made by users
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What 3 characteristics does relevant information have?
Predictive value
Confirming Value
Materiality
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When does information have predictive value?
it can be used to predict future outcomes
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When does information have confirming value?
it provides feedback about evaluations previously made by users.
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When is information material?
if an omission or misstatement of the informaiton could affect the decisions made by users based on finacial informaiton.
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What is Faithful Representation?
information that is complete, neutral, and free from error ( basicly as reliable as possible)
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What are the 3 parts of Faithful Representation?
Completeness
Neutral
Free from error
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Is perfect faithful representation acheiveable?
No, it must be maximized though.
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What is Completeness?
all informaiton neccessary for the user to understand the reported economic phenomena including descriptions and explanations.
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What is Neutrality?
financial informaiton is free from bias
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If information can be used to predict future outcomes, it has................
Predictive Value
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If informaiton provides feedback about evaluations previously made by users, it has ....................
Confirmaing value
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If the omission or misstatement of informaiton could affect the decisions made by users based on financial informaiton, that informaiton is......................
Material
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If informaiton has Predictive value, confirming value, and is material than it is ......................
relevant
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relevant and faithful information are what characteristics?
Fundamental Qualitative Characteristics
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if information is free from error, what does it mean..........
that there are no errors in the selection or application of the process use to produce reported financial information an that there are no errors or omissions in the descriptions of economic phenomena.
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When information has no errors in the slection of application of the process used to produce it and there are no errors or omissions in the descriptions of economic phonomena, what descibes it?
Freedom from error
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What are the steps to apply the Fundamental Qualitative Characteristics?
1. identify the phonomena that has the potential to be useful tot he users of a reporting entitys finacial informaiton
2.identify the type of informaiton about the phenomena that would be most relevant
3. Determine whether the informaiotn is available and can be faithfully represented
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List the Enhancing Qualitative Characteristics
Comparability
Verifiability
Timeliness
Understandability
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What are enhancing Qualitative Characteristics used for?
used to determine how a phenomena should be depicted if two way are equally releant and faithfully represented
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What is comparability
information is more useful if it can be compared with similar information about other entities or from other time periods.
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What is Verifiability
it means that different knowledgeable and independent observers can reach consersus that a particular depiction is faithfully represented
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What is Timeliness
it means that information is available to users in time to be capable of influencing their decisions
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what is understandability
it means that informaiton is understandable if it is classified, characterized and presented clearly and concisely.
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What are comparability , verifiability, timeleness, and understandability
enhancing qualitative characteristics
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What is a cost constraint
the benefits of reporting financial informaiton must be greater than the costs of obtaining and presenting the information.
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If the benefits of reporting financial information are greater than the costs of obtaining and presenting the information, what is this
a cost constraint
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list the characteristics of a nonbusiness organization
1. a significant portion of their resources come from contributions and grants
2. their operating purposes are other then to provide goods or services for profit
3. they lack ownership interests that can be sold transferred or redeemed or that allow a claim on resources upon liquidation
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list the users of nonbusiness organizations financail information
resource providers(such as suppliers, employees, members, taxpayers,....) Constituents who use and benefit from the services, governing and oversight bodies, managers
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list the full set of financial statements
1. statement of financial position (balance sheet)
2. statement of earnings ( the income statement)
3. staement of comprehensive income
4. statement of cash flows
5. statement of changes in owners equity
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what is another name for the Statement of financail position
the balance sheet
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what is another name for the statement of earnings
the income statement
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What are the measurement attributes for assets and liabilities
1. historical cost
2. current cost
3. net realizable cost
4. current market value
5. present value of future cash flows
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List the fundamental assumptions of U.S. GAAP
1. entity assumption
2. going concern assumption
3. monetary unit assumption
4. periodicity assumption
5. historical cost principle
6. revenue recognition principle
7. matching principle
8. accuarl accounting
9. full disclosure principle
10. conservatism principle
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What is the entity assumption
economic activity can be accounted for when considering an identiable set of activities
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what is the going concern assumption
it is presumed that the entity will continue to operate in the foreseeable future
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what is the monetary unit assumption
it is assumed that money is an appropriate basis by which to measure economic activity. it does not change with the passage of time.
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periodicity assumption
economic activity can be divided into meaningful time periods
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historical cost principle
as a general rule financial informaiton is accounted for and based on cost not current market value
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what is the revenue recognition principle
as a general rule revenue should be recognized when it is earned and when it is realized or realizable
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what does earned mean
when the enity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues
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What does realized mean
revenues and gains are recognized when products merchandise or othter assets are exchanged for cash or claims to cash or when related assets recieved or hled are readly converible to known amounts of cash or claims to cash
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what is the matching principle
all expenses incurred to generate a specific amount of revenue in a period are matched against that revenue
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what is accrual accounting
revenues are recognized when they are earned and eapenses are recognized in the same period as the related revenue, not necessarily in the period in which the cash is received or expended by the company
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what is the full disclosure principle
it is important that the user be given information that would make a difference in the decision process but not so much information that the user is impeded in analyzing what is important
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what is the conservatism principle
when in doubt when selecting from alternative GAAP methods the method that is least likely to overstte assets and understate liabilities in the current period should be selected
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when are revenues or gains recognized
when the earnings process is complete
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when are expenses/ losses recognized
immediately
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The IASB fromaework for the preparation and presentation of financial statements outlines only two fundamental assumptions what are they
1. accrual basis accounting
2. going concern
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what are all the elements in the financial statements
- 1. comprehensive income
- 2. revenues
- 3. expenses
- 4. gains
- 5. losses
- 6. assets
- 7. liabilities
- 8. equity
- 9. investments by owners
- 10. distributions to owners
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what is comprehensive income
includes all differences between beginning equity and ending equity other han transactions with owners
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what are revenues
inflows, enhancements of assets or reductions of liabilities from delivering goods or services as a part of normal operations.
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what are expenses
outflows uses of assets or the incurrence of liabilities fromdelivering goods or services as part of normal operations
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what are gains
increases in equity from peripheral reansactions and other events except reneue and investments from owners
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what are losses
decreases in equity from peripheral transactions and other events except expenses and distributions to owners
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what are assets
probable future economic benefits to be received by the company as a result of past transactions or events.
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what is a liability
probable future sacrifices of exonomic benefits arising from a present obligaion of the company to transfer assts or provide services to other entites in the fultre as a result of past transactions or events
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the residual interest in the assets of the company that remains after deducting its liabilities
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what are investmetns by owners
the increases in assets from transfers of cash property or services from owners
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what are distribtions to owners
are decreases in assets from transfers of cash prperty or wervices or the incurrence of a liability to owners
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What are the elements of present value measurement
- 1. estimate of future cash flow
- 2. expectations about timeing variations of future cash flows
- 3. time value of money
- 4. the price of money
- 5. other factors
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what is the fair value objective
if fair value cannot be determined in the marketplace the objective must be to obtain an estimate of fair value
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