Aem 3360: Chapter 1: Financial Statement & Financial Reporting

Front 1

The Committee on Accounting Procedure issues?

Back 1

Accounting Research Bulletins

Front 2

The Accounting Standards Executive Committee issues?

Back 2

{Remember this is AcSEC}

Statements of Position
Practice Bulletins

Front 3

THe Accounting Principles Board issues?

Back 3

Opinions

Front 4

The Financial Accounting Standards Board issues?

Back 4

Financial Accounting Standards

Front 5

APB

Back 5

Accounting Principles Board (APB). An accounting rule-making board which provided official pronouncements, called APB Opinions, from 1959 through 1973.

Front 6

ARB

Back 6

Accounting Research BuUetins (ARBs). Pronouncements issued by CAP dealing with a variety of timely accounting problems during the years 1939 to 1959.

Front 7

AcSEC

Back 7

Accounting Standards Executive Conunittee (AcSEC). The sanior technical committee that was authorized to speak for the AICPA in the area of financial accounting and reporting.

Front 8

AICPA

Back 8

American Institute of Certified Public Accountants (AICPA). The national professional organization of practicing Certified Public Accountants.

Front 9

APB Opinions

Back 9

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.

Front 10

CAP

Back 10

Conunittee on Accounting Procedure (CAP). An organization composed of practicing CPAs which issued Accounting Research Bulletins dealing with a variety of accounting problems during the years 1939 to 1959.

Front 11

EITF

Back 11

Emerging Issues Task Force Created by the FASB with the purpose of having members reach a consensus on how to account for new and unusual financial transactions that have the potential for creating differing financial reporting practices.

Front 12

EITF Statements

Back 12

Pronouncements issued by the EITF which examine emerging financial reporting issues and state how to account for new and unusual accounting transactions.

Front 13

Financial Accounting Concepts

Back 13

A series of pronounc«n«its 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.

Front 14

FAF

Back 14

Financial Accounting Foundation. The organization that selects the members of the FASB and the FASAC, funds their activities, and genially oversees the FASB's activities.

Front 15

Financial Accounting Interpretations

Back 15

Pronouncements issued by the FASB which represent modifications or extensions of existing standards.

Front 16

Financial Accounting Standards

Back 16

Pronouncements issued by the FASB which are considered generally accepted accounting principles.

Front 17

FASAC

Back 17

Financial Accounting Standards Advisory Council (FASAC). A council responsible for consulting with the FASB on both major policy and technical issues.

Front 18

FASB

Back 18

Financial Accounting Standards Board (FASB). A seven member board created in 1973 which currently establishes and improves standards of financial accounting and reporting for the guidance and education of the public.

Front 19

GAAP

Back 19

A common set of standards and procedures adopted by the accounting profession.

Front 20

Internal Controls

Back 20

A system of checks and balances designed to prevent and detect fraud and errors.

Front 21

IASB

Back 21

Based in London, it produces the International Financial Reporting Standards (IFRS).

Front 22

PCAOB

Back 22

Public Company Accounting Oversight Board (PCAOB) Established by the Sarbanes-Oxley Act of 2002 and has oversight and enforcement authority and establishes auditing. Quality control, and independence standards and rules.

Front 23

Sarbanes-Oxley Act of 2002

Back 23

Passed by Congress in response to accounting scandals like Enron, Cendant, Sunbeam, Rite-Aid and WorldCom.

Front 24

SEC

Back 24

Securities and Exchange Commission (SEC). An agency of the federal government that administers the Securities Exchange Act of 1934.

Front 25

The better the information in accounting...?

Back 25

The more effective the process of capital allocation and then the healthier the economy.

Front 26

When the SEC was created, the SEC encouraged...?

Back 26

the creation of a private standards-setting body.

Front 27

How does the SEC affirm its support for the FASB?

Back 27

By indicating that financial statements conforming to standards set by the FASB will be presumed to have substantial authoritive support.

Front 28

Substantial Authoritive Support?

Back 28

Generally Accepted Accounting Principles have SAS. These are the first documents you refer to when regarding accounting principles.

Front 29

What accounting principles have Substantial Authoritive Support?

Back 29

1. FASB Statements
2. Interpretation
3. Staff Positions
4. APB Opinions
5. ARBs

These are the statements that are issued by the timeline of CAP, APB and the FASB.

Front 30

IF the SEC believes that an accounting or disclosure irregularity exists regarding a company's financial statements it will issue a ___?___ and then a ___?___ subsequently if warranted.

Back 30

1. Deficiency Letter.
2. Stop Order

A stop order prevent registrants from issuing securities or trading securities on the exchanges.

Front 31

The APB was designated in 1959 to be AICPA's

Back 31

Sole authority for public pronouncements on accounting principles.

Pronoucement: a formal or authoritative statement.

The act of pronouncing.

Front 32

Wheat Committee

Back 32

This group know as the Study Group on Establishment of Accounting Principles (SGEAP), was set up to study the APB and recommend changes in its structure and operation.

Front 33

What are the two basic premises of the FASB in establishing financial accounting standards?

Back 33

1. It should be responsive to the needs and veiwpoints of the entire economic community, not just the accounting profession.
2. It should operate in full view of the public through a "due process" system that gives interested persons ample opportunity to make their view known.

Front 34

The FASB issues three major types of pronouncements?

Back 34

1. Standards, Interpretations, Staff Positions.
2. EITF Statments
3. Financial Accounting Concepts

Front 35

Do Concept Statements issued by the FASB establish GAAP?

Back 35

No!

The concept statements are simply intended to form a cohesive set of interrelated concepts, a conceptual framework, that will serve as tools for solving existing and emerging problems in a consisttent manner.

Front 36

What has directly casued the role of the AICPA to diminish?

Back 36

The creation of FASB. This and the Wheat Committee caused the demise of the APB. Remember APB was a AICPA creation, FASB is not.

Front 37

Review: Synonym of Wheat Committee?

Back 37

Study Group on the Establishment of Accounting Principles

Front 38

What did the AICPA create when the FASB was created?

Back 38

Accounting Standards Executive Committee.

Front 39

Are the pronouncements issued by the AcSEC have Substantial Authoritative Support?

Back 39

No, they are GAAP, but do not have highest Substantial Authoritative Support. Think About It

Front 40

Infocard

Back 40

The Sarbanes Oxley Act requires public companies to attest to the effectiveness of their internal controls over financial reporting.

Front 41

AcSEC pronouncement:

Audit & Accounting Guides

Back 41

Summarize the accounting practices of specific industries and provide specific guidance on matters not addressed by the FASB.

Example Industries:

Casinos, Universities and Colleges and Airlines.

Front 42

Statements of Position

Back 42

Provide guidance on financial reporting topics until the FASB sets standards ont he issue in question.

Front 43

Practice Bulletins

Back 43

Indicates AcSEC's view on narrow financial reporting issues not considered by the FASB

Front 44

In order for Financial Statements to be useful?

Back 44

1. Clearly Understandable
2. Easily Comparable to statements within one firm.
3. Easily Comparable to statements of a similar firm.

Front 45

Explain how accounting assists in the efficient use of scarce resources?

Back 45

Resources are allocated to the most efficient enterprises, by means of the following.

Financial Statements are useful for:

1. Investors: Only the most innovative, successful enterprises should attract investor's money.

2. Creditors: these people will only award the most responsible companies with money.

This is how accounting can improve the economy in general.

Front 46

Identify the basic financial statements or general purpose statements

Back 46

1. Statement of Cash Flows
2. Balance Sheet
3. Statement of shareholder's or owner's equity
4. Income Statement

Front 47

What is the need for accounting standards?

Back 47

If not, readers of financial statements would have to familiarize themselves with every company's peculiar accounting and reporting practices.

Front 48

Stewardship Function

Back 48

The stewardship function measures and reports data to absentee owners, because most business owners (think: shareholders) are not involved in the business.

Front 49

What are an integral part of the general purpose statements?

Back 49

Note Disclosures

Front 50

Infocard

Back 50

Information based on accrual accounting better indicates a company's present and continuing ability to generate favorable cash flows than does information limited to the financial effects of cash receipts and cash payments for a recent time period.

Front 51

What are two standards that are accepted internationally?

Back 51

1. U.S. GAAP
2. IFRS (International Financial Reporting Standards)

The IFRS are issued by the IASB

Front 52

Explain the Steps in Due Process

Back 52

1. Topic Placed on Board's Agenda.
2. the Discussion Memorandum discusses Pros & Cons fround from analysis and research.
3. Public Hearing on proposed standard.
4. the Exposure Draft is issued after the board evalutes the research done and the public response.
5. From the exposure draft, final corrections are made and this exposure draft become a FASB Standard.

Front 53

True of False?

Financial Accounting is the process that culminates in the preparation of financial reports on an enterprise and that are used by both internal and external parties.

Back 53

You marked False.

Reason: You thought that they made a distinction between external and internal and thus managerial and financial accounting. However, financial accounting can be used for internal purposes as well.

Front 54

True or False?

The difference between ARBs and APB Opinions is that ARBs deal with accounting theory and the APB Opinions deal with accounting practice.

Back 54

True

Remember:

APB Opinion: Accounting Practice

ARB: Accounting Theory

Front 55

True or False

The major purpose of the ARB during its 13 year exisitence was to develop a single set of accounting standards useful to all business entities.

Back 55

False

the major purposes of the APB were:

1. To advance the written expression of accounting principles. (remember focused on Accounting Practice)
2. To determine appropriate practices (practices)
3. To narrow the areas of difference and inconsistency in practice.

Notice Practice, Practice, Practice!

Front 56

FASB Staff Positions provide interpretive guidance and also minor amendments to standards and interpretations, but do not have the same authority as standards and interpretations.

Back 56

False

FASB DO have the same authrotiy as Interpretations and Standards.