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37 Cards in this Set
- Front
- Back
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Financial Statements and Financial Reporting |
* Accounting and Capital Allocation * Objective * Need to Develop Standards |
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Parties Involved in Standard-Settings |
* Securities and Exchange Commissions (SEC) * American Institute of CPAs (AICPA) * Financial Accounting Standards Board (FASB) * Changing Role of the CPA |
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Generally Accepted Accounting Principle (GAAP) |
FASB Codification |
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Issues in Financial Reporting |
* Political Environment * Expectations gap * Financial Reporting Challenges * International Accounting Standards * Ethics |
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Essential Characteristics Of Accounting |
* Identification * Measurement *Communication of Financial information about Economic Entities to: - Interested Parties - Internal and External Users |
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Financial Reporting and Financial Statements should provide Financial information about the reporting entity that is USEFUL to |
* Present and potential equity investors * Lenders and other creditors In making decisions about providing resources to the entity. |
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Sources of Financial Accounting Information |
Financial Statements and Additional Information |
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What are the 5 Financial Statements |
* Balance Sheet * Income Statement * Statement of Cash Flows * Statement of Owners' or Stockholders' Equity * Note Disclosures |
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What is GAAP |
GAAP is: Generally Accepted Accounting Principles - Containing a set of Standards that are universally practiced |
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What are the three parties involved in Standard Setting |
* (SEC) Securities and Exchange Commission * (FASB) Financial Accounting Standards Board * (AICPA) American Institute of CPA |
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SEC - Securities and Exchange Commission is and does what? |
* SEC is a U.S. Federal Agency * SEC has broad powers related to the oversight and enforcement of Financial Reporting for Public Companies. |
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The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as |
Sometimes Primary and sometimes Secondary. |
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Which of the following was established by the federal government to help develop and standardize financial information presented to stockholders? |
SEC |
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The first step taken in the establishment of a typical FASB statement is:
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Steps 1.Topic is Identified and placed on boards agenda. 2. Research is conducted and Discussion Memorandum is issued. 3. Public Hearing 4. Board Evaluates Research, public response and issues an Exposure Draft. 5. Board Evaluates Draft and issues a final Ultimate new Standard for Accounting. |
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True or False
Financial Accounting Concepts are a major type of pronouncement issued by the FASB. |
True |
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What following publication is not considered a GAAP document is it * Statements of financial standards issued by the FASB * Accounting interpretations issued by the FASB * APB Opinions or * The Accounting research studies issued by the AICPA |
The accounting research studies issued by the AICPA are not considered GAAP documents. The AICPA is responsible for the CPA Exams
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The (AICPA) American Institute of Certified Public Accountants is Responsible for |
(CPA) Certified Public Accountant - Exams |
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The AICPA Established the Following? |
(CAP) Committee Accounting Procedure and (APB) Accounting Principles Board |
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What was CAP |
CAP Committee Accounting Procedure was Responsible for a - Problem by Problem Approach * established in 1939 * CAP issued 51 Accounting Research Bulletins * The Problem by Problem Approach failed and was discontinued in 1959 |
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What was APB |
APB Accounting Principles Board * established in 1959 to replace the CAP * Issued 31 Accounting Principle Board Opinions * APB was made up of 18 - 21 members and were required to be CPAs. * Members were volunteers and worked part time while maintaining other jobs. * ABP was dismantled in 1973 by the recommendations from the Wheat Committee |
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GAAP- Generally accepted accounting principles are? |
* Are influenced by pronouncements of the - SEC and IRS. * Include detailed practices and procedures * Broad guidelines of general application. * Changes over time as the environment of business changes. |
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True or False Politics plays no role in establishing GAAP |
FALSE Politics is everywhere and does play a role in GAAP because GAAP are used in the real world and which comes with the pressures of the real world. |
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True or False The IFRS is used by all Companies that are listed in the European Union? |
TRUE Those that are in the European Union use IFRS and is overseen by the (IASB) International Accounting Standards Board which is headquartered in London. In fact over 115 countries use IFRS. |
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Financial information that is better provided, or can only be provided, by means of financial reporting other than formal financial statements include?
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* President's letter
* News releases * Management's forecasts |
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Pronouncements Issued by the FASB |
* ASU- Accounting Standards Update * EITF- Emerging Issues Task Force - * SFA or SFAS - Statement of Financial Accounting / standards |
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ASU Accounting Standards Update |
For Statement of Financial Accounting
- Issues Interpretations, modify, or extends existing standards. |
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ETIF Emerging Issues Task Force |
- Created from the 2008 credit and investment crises
- Comprised of CPA firms and financial statement prepare-rs. - Who address short-term financial reporting issues that arise. |
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SFA or SFAS
Statement of Financial Accounting / standard |
Provide conceptual framework for establishing GAAP |
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Generally provides a better indication of an enterprise's present and continuing ability to generate favorable cash flows? |
Accrual Basis Accounting |
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The process of determining how and at what cost money is allocated among competing interests.
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Capital Allocation |
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Accounting principles are “generally accepted” only when? |
* An authoritative accounting rule-making body has established it in an official pronouncement. or * Over time it has been accepted as appropriate because of its universal application. |
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The financial statements most frequently provided by public companies include? |
* The Balance Sheet * Statement of Cash Flows * Statement of Stockholders' Equity |
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What is a major type of pronouncement issued by FASB? |
Financial Accounting Concepts |
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Issues Related to Financial Accounting |
* Timeliness of Information * Expectations Gap * Ethical Reporting vs. Accounting Scandals |
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SEC requires Timeliness of Information |
* Smaller Companies have 90 days to file 10- k 40 days to file 10- Q * Larger Companies have 60 days to file 10- k 45 days to file 10- Q |
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Expectation Gap |
- What Public thinks Accountants should do vs. - What Standards require Accountants to do |
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Ethical Reporting vs. Accounting Scandals The Governments Response to the scandal |
The SARBANES OXLEY ACT of 2002 (SOX) * CEOs and CFOs certify regarding the accuracy of the financial statements and have to forfeit any bonuses they received if f/s have to be re-stated in the future * PCAOB was also created to establish auditing standards * Publicly traded companies, Internal Controls are audited and are now required to follow SOX. |
