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18 Cards in this Set
- Front
- Back
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Essential characteristics of accounting |
the identification, measurement, and communication of financial information about economic entities to interested parties |
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Objectives of financial reporting |
to provide information about the reporting entity that is useful to present and potential equity investors and creditors in their capacity as capital providers. equity investors and creditors entity perspective decision usefulness |
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External Users |
investors, creditors, and others. Rely on external financial reporting, including financial statements prepared according to GAAP |
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INternal Users |
Need information to plan, evaluate and control an organization's operations. Primarily rely on managerial accounting |
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GAAP |
established by an authoritative rule-making body such as the FASB and AICPA. Principles to follow when collecting and presenting accounting information externally. Developed in the private sector but subject to political pressures and changes in the environment. Codification. more detailed than IFRS |
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FASB |
Not a government organization. Developed in private sector, but monitored by SEC |
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International Financial Reporting Standards IFRS |
set of accounting principles that is rapidly gaining acceptance worldwide. published by IASB more focused on objectives and principles and less reliant on detailed rules than GAAP. US not using, no longer looking into switching, but much more similar than 15 years ago. |
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IFRS History |
nov. 2007: SEC eliminated the requirement for foreign companies listing in US to reconcile IFRS to US GAAP. no more making 2 finc statements. IFRS now used in over 115 countries, with more expected to follow. Too many inconsistencies in IFRS |
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Key Benefits of IFRS |
Reduced complexity, greater transparency, increased comparability, improved efficiency Investors want an "apples to apples" comparison with foreign companies. Global companies want to prepare all financial statements with one set of standards to reduce costs. *less finc statements made. |
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Standard Setting Process |
since 1973, FASB has had responsibility for setting accounting standards. "due process" is used when considering new standards (slow process) |
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FASB Pronouncements |
standards, interpretations, staff positions financial accounting concepts: joint project with IASB Emerging Issues Task Force |
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Emerging Issues Task Force |
FASB Pronouncement comprised of representatives of CPA firms and other financial statement preparers.
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FASB Codification |
new single source of US GAAP no more levels of GAAP Organized into topics, subtopics, sections, paragraphs hope is that will help users gain a better understanding of GAAP |
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How are standards enforced? |
SEC: analysts looking for violations Stock exchange listing Requirements: must follow GAAP to be traded or get Delisted Creditors: force even private company to follow GAAP AICPA Code of Ethics: public acct firms, auditors Financial statement Users: expecting and demanding them to follow. |
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Sarbanes Oxley Act of 2002 |
Established by PCOAB Increased auditor independence standards Requires CEO/CFO personal certification of financial results. Requires audit committee members to be independent and have financial expertise management and auditors must certify internal controls (404) |
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PCAOB |
Public Company Acct Oversight Board Audit the auditors write auditing standards - GAAS (auditor standards) |
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SOX 404 |
have to audit internal controls as well. large amount of work, now hire more people, made it better - make money from it. Employees are still not fans. |
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Challenges Facing Accounting |
How to account for soft assets Convergence with IFRS Nonfinancial measures More forward looking information more timely information ethics: if investors don't believe, everything falls apart |
