Addthis ch01
Financial
Financial Accounting
Accounting and
and
Accounting
Accounting Standards
Standards
Chapte
r
1
Intermediate Accounting,
12th Edition
Kieso, Weygandt, and Warfield
Chapter
1-1
Prepared by Coby Harmon, University of California, Santa
Chapter
Chapter 11 Learning
Learning Objectives
Objectives
1.
Identify the major financial statements and other means of
financial reporting.
2.
Explain how accounting assists in the efficient use of scarce
resources.
3.
Describe some of the challenges facing accounting.
4.
List the objectives of financial reporting.
5.
Explain the need for accounting standards.
6.
Identify the major policy-setting bodies and their role in the
standard-setting process.
7.
Explain the meaning of generally accepted accounting
principles.
8.
Describe the impact of user groups on the standard-setting
process.
9.
Understand issues related to ethics and financial accounting.
Chapter
1-2
Financial
Financial Accounting
Accounting and
and Accounting
Accounting
Standards
Standards
Financial
Financial Statements
Statements
and
and Financial
Financial
Reporting
Reporting
Accounting and
Capital Allocation
Challenges
Objectives
The Need to
Develop Standards
Chapter
1-3
Parties
Parties Involved
Involved in
in
Standard
Standard Setting
Setting
Securities and
Exchange
Commission (SEC)
American Institute of
Certified Public
Accountants (AICPA)
Financial Accounting
Standards Board
(FASB)
Governmental
Accounting
Standards Board
(GASB)
Changing Role of the
AICPA
Generally
Generally Accepted
Accepted
Accounting
Accounting
Principles
Principles
Issues
Issues in
in Financial
Financial
Reporting
Reporting
Political Environment
The Expectations
Gap
International
Accounting
Standards
Ethics
Characteristics
Characteristics of
of Accounting
Accounting
Essential characteristics of accounting
are:
(1) the identification, measurement, and
communication of financial
information about
(2) economic entities to
(3) interested parties.
parties
Chapter
1-4
LO 1 Identify the major financial statements and other means of financial
reporting..
Characteristics
Characteristics of
of Accounting
Accounting
Economic Entity
Financial Statements
Additional Information
Financial
Information
Balance Sheet
President’s letter
Income Statement
Prospectuses,
Statement of Cash
Flows
SEC Reporting
Accounting?
Identifies
and
Measures
and
Communicat
es
Chapter
1-5
News releases
Statement of
Owners’ or
Stockholders’
Equity
Environmental
Reports
Note Disclosures
Etc.
GAAP
Not GAAP
Forecasts
LO 1 Identify the major financial statements and other means of financial
reporting..
Characteristics
Characteristics of
of Accounting
Accounting
Review
What is the purpose of information presented in
notes to the financial statements?
a. To provide disclosure required by generally
accepted accounting principles.
b. To correct improper presentation in the financial
statements.
c. To provide recognition of amounts not included
in the totals of the financial statements.
d. To present management’s responses to auditor
comments.
Chapter
1-6
LO 1 Identify the major financial statements and other means of financial
reporting..
Accounting
Accounting and
and Capital
Capital Allocation
Allocation
Resources are limited. Efficient use of resources often
determines whether a business thrives.
Illustration 1-1
Capital Allocation
Process
Financial
Financial
Reporting
Reporting
Information to help
users with capital
allocation decisions.
Chapter
1-7
Users
Users
Capital
Capital Allocation
Allocation
Investors, creditors,
and other users
The process of
determining how and
at what cost money
is allocated among
competing interests.
LO 2 Explain how accounting assists in the efficient use of scare
Accounting
Accounting and
and Capital
Capital Allocation
Allocation
Review
An effective process of capital allocation is critical to
a healthy economy, which
a. promotes productivity.
b. encourages innovation.
c. provides an efficient and liquid market for
buying and selling securities.
d. All of the above.
Chapter
1-8
LO 2 Explain how accounting assists in the efficient use of scare
Challenges
Challenges Facing
Facing Financial
Financial
Accounting
Accounting
Non-financial Measurements
Forward-looking Information
Soft Assets
Timeliness
Chapter
1-9
LO 3 Describe some of the challenges facing accounting.
Objectives
Objectives of
of Financial
Financial Accounting
Accounting
Financial
Financialreporting
reportingshould
shouldprovide
provideinformation:
information:
(a)
(a) that
that is
is useful
useful to
to present
present and
and potential
potential investors
investors and
and
creditors
creditors and
and other
other users
users in
in making
making rational
rational
investment,
investment, credit,
credit, and
and similar
similar decisions.
decisions.
(b)
(b) to
to help
help present
present and
and potential
potential investors
investors and
and creditors
creditors
and
and other
other users
users in
in assessing
assessing the
the amounts,
amounts, timing,
timing, and
and
uncertainty
uncertainty of
of prospective
prospective cash
cash receipts.
receipts.
(c)
(c) about
about the
the economic
economic resources
resources of
of an
an enterprise,
enterprise, the
the
claims
claims to
to those
those resources,
resources, and
and the
the effects
effects of
of
transactions,
transactions, events,
events, and
and circumstances
circumstances that
that change
change
its
its resources
resources and
and claims
claims to
to those
those resources.
resources.
Chapter
1-10
LO 4 List the objectives of financial reporting.
Objectives
Objectives of
of Financial
Financial Accounting
Accounting
Review
All of the following are objectives of financial
reporting except to provide information
a. About enterprise resources, claims to those
resources, and changes in them.
b. That is useful in investment and credit decisions.
c. About the management and major shareholders of
an enterprise.
d. That is useful in assessing cash flow prospects.
Chapter
1-11
LO 4 List the objectives of financial reporting.
Need
Need to
to Develop
Develop Standards
Standards
Financial Statements
Various users
need financial
information
Balance Sheet
Income Statement
Statement of Stockholders’
Equity
Statement of Cash Flows
Note Disclosure
The accounting profession
has attempted to develop
a set of standards that are
generally accepted and
universally practiced.
Chapter
1-12
Generally
Accepted
Accounting
Principles (GAAP)
LO 5 Explain the need for accounting standards.
Parties
Parties Involved
Involved in
in Standard
Standard Setting
Setting
Four organizations:
•
Securities and Exchange Commission (SEC)
American Institute of Certified Public
Accountants (AICPA)
•
Financial Accounting Standards Board (FASB)
•
Government Accounting Standards Board
(GASB)
•
Chapter
1-13
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Securities
Securities and
and Exchange
Exchange
Commission
Commission
Established by federal government
Accounting and reporting for public companies
Securities
Securities
Act
Act of
of 1933
1933
Securities
Securities
Act
Act of
of 1934
1934
Encouraged private standard-setting body
SEC requires public companies to adhere to
GAAP
SEC Oversight
Enforcement Authority
Chapter
1-14
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
American
American Institute
Institute of
of CPAs
CPAs
National professional organization
Established the following:
Committee
Committee on
on
Accounting
Accounting
Procedures
Procedures
Chapter
1-15
Accounting
Accounting
Principles
Principles Board
Board
1939 to 1959
1959 to 1973
Issued 51 Accounting
Research Bulletins
(ARBs)
Issued 31 Accounting
Principle Board
Opinions (APBOs)
Problem-by-problem
approach failed
Wheat Committee
recommendations
adopted in 1973
http://www.aicpa.org/
LO 6
Financial
Financial Accounting
Accounting Standards
Standards
Board
Board
Wheat Committee’s recommendations resulted in the creation
of a the Financial Accounting Standards Board in 1973.
Financial
Accounting
Foundation
Chapter
1-16
Selects members of the FASB
Funds their activities
Exercises general oversight.
Financial
Accounting
Standards Board
Mission to establish and
improve standards of financial
accounting and reporting.
Financial
Financial Accounting
Accounting
Standards
Standards Advisory
Advisory
Council
Council
Consult on major policy issues.
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Financial
Financial Accounting
Accounting Standards
Standards
Board
Board
Missions is to establish and improve standards of
financial accounting and reporting. Differences
between FASB and APB include:
Smaller Membership
Full-time, Remunerated Membership
Greater Autonomy
Increased Independence
Broader Representation
http://www.fasb.org/
Chapter
1-17
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Financial
Financial Accounting
Accounting Standards
Standards
Board
Board
Review
The first step taken in the establishment of a
typical FASB statement is
a. The board conducts research and analysis and a
discussion memorandum is issued.
b. A public hearing on the proposed standard is held.
c. The board evaluates the research and public
response and issues an exposure draft.
d. Topics are identified and placed on the board’s
agenda.
Chapter
1-18
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Due
Due Process
Process
FASB relies on two basic premises:
Responsive to entire economic community
(2) Operate in full view of the public
(1)
Step 1 =
Topic placed on agenda
Step 2 =
Research conducted and Discussion
Memorandum issued.
Step 3 =
Public hearing
Step 4 =
Board evaluates research, public response
and issues Exposure Draft
Step 5 =
Board evaluates responses and issues final
Statement of Financial Accounting Standard
Chapter
1-19
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Types
Types of
of Pronouncements
Pronouncements
Issued by the FASB:
Standards, Interpretations, and Staff Positions.
Financial Accounting Concepts
Emerging Issues Task Force Statements
Chapter
1-20
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Governmental
Governmental Accounting
Accounting Standards
Standards
Board
Created in 1984 to addressBoard
state and local governmental
reporting issues.
Chapter
1-21
Financial
Accounting
Foundation
Financial
Accounting
Standards Board
Governmental
Accounting
Standards Board
Financial
Financial Accounting
Accounting
Standards
Standards Advisory
Advisory
Council
Council
Governmental
Governmental
Accounting
Accounting
Standards
Standards Advisory
Advisory
Council
Council
http://www.gasb.org/
LO 6
Generally
Generally Accepted
Accepted Accounting
Accounting
Principles
Principles
Those principles that have substantial
authoritative support.
Major sources of GAAP are:
FASB Standards, Interpretations, and Staff Positions
APB Opinions
AICPA Accounting Research Bulletins
Chapter
1-22
LO 7 Explain the meaning of generally accepted accounting
House
House of
of GAAP
GAAP
AICPA Accounting
Interpretations
FASB Implementation
Guides
Recognized Industry
Practices
Category D (Least Authoritative)
FASB Emerging Issues Task Force
AICPA AcSEC Practice Bulletins
Category C
AICPA Industry Audit
and Accounting
Guides
FASB Technical
Bulletins
AICPA Statements of
Position
Category B
FASB
FASB Statements,
Statements,
Interpretations, and
Staff Positions
Chapter
1-23
APB
APB Opinions
Opinions
CAP Accounting
Research Bulletins
Category A (Most Authoritative)
LO 7
Generally
Generally Accepted
Accepted Accounting
Accounting
Principles
Principles
Review
Which of the following accounting pronouncements
is the most authoritative?
a. FASB Statement of Financial Accounting Concepts.
b. FASB Technical Bulletins.
c. AICPA Accounting Principles Board Opinion.
d. AICPA Statement of Position.
Chapter
1-24
LO 7 Explain the meaning of generally accepted accounting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Standard Setting in a Political
Environment
Accounting standards are as much a product of
political action as they are of careful logic or
empirical findings.
Chapter
1-25
LO 8 Describe the impact of user groups on the standard-setting
Standard
Setting
Business
BusinessEntities
Entities
CPAs
CPAsand
and
Accounting
AccountingFirms
Firms
AICPA
AICPA(AcSEC)
(AcSEC)
Financial
Financial
Community
Community
FASB
FASB
Academicians
Academicians
Investing
InvestingPublic
Public
Accounting standards,
interpretations, and bulletins
Chapter
1-26
Illustration 1-5 User
Groups that Influence
Accounting Standards
Preparers
Preparers
(e.g.,
(e.g.,FEI)
FEI)
Government
Government
(SEC,
(SEC,IRS,
IRS,other
other
agencies)
agencies)
Industry
Industry
Associations
Associations
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Review:
All those who serve on the FASB must be
Certified Public Accountants.
False
Chapter
1-27
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Expectation Gap
What the public thinks accountants should do vs.
what accountants think they can do.
Difficult to close
Sarbanes-Oxley Act (2002)
Public Company Accounting Oversight Board
(PCAOB)
Chapter
1-28
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
International Accounting Standards
Two sets of standards accepted for international
use:
U.S. GAAP, issued by the FASB
International Financial Reporting Standards
(IFRS), issued by the IASB
FASB and IASB recognize that global markets will best
be served if only one set of GAAP is used.
Chapter
1-29
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Ethics in the Environment of Financial
Accounting
In accounting, we frequently encounter ethical
dilemmas.
GAAP does not always provide an answer
Doing the right thing is not always easy or
obvious
Chapter
1-30
LO 9 Understand issues related to ethics and financial
Copyright
Copyright
Copyright © 2006 John Wiley & Sons, Inc. All rights
reserved. Reproduction or translation of this work beyond
that permitted in Section 117 of the 1976 United States
Copyright Act without the express written permission of
the copyright owner is unlawful. Request for further
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responsibility for errors, omissions, or damages, caused by
the use of these programs or from the use of the
information contained herein.
Chapter
1-31
Financial Accounting
Accounting and
and
Accounting
Accounting Standards
Standards
Chapte
r
1
Intermediate Accounting,
12th Edition
Kieso, Weygandt, and Warfield
Chapter
1-1
Prepared by Coby Harmon, University of California, Santa
Chapter
Chapter 11 Learning
Learning Objectives
Objectives
1.
Identify the major financial statements and other means of
financial reporting.
2.
Explain how accounting assists in the efficient use of scarce
resources.
3.
Describe some of the challenges facing accounting.
4.
List the objectives of financial reporting.
5.
Explain the need for accounting standards.
6.
Identify the major policy-setting bodies and their role in the
standard-setting process.
7.
Explain the meaning of generally accepted accounting
principles.
8.
Describe the impact of user groups on the standard-setting
process.
9.
Understand issues related to ethics and financial accounting.
Chapter
1-2
Financial
Financial Accounting
Accounting and
and Accounting
Accounting
Standards
Standards
Financial
Financial Statements
Statements
and
and Financial
Financial
Reporting
Reporting
Accounting and
Capital Allocation
Challenges
Objectives
The Need to
Develop Standards
Chapter
1-3
Parties
Parties Involved
Involved in
in
Standard
Standard Setting
Setting
Securities and
Exchange
Commission (SEC)
American Institute of
Certified Public
Accountants (AICPA)
Financial Accounting
Standards Board
(FASB)
Governmental
Accounting
Standards Board
(GASB)
Changing Role of the
AICPA
Generally
Generally Accepted
Accepted
Accounting
Accounting
Principles
Principles
Issues
Issues in
in Financial
Financial
Reporting
Reporting
Political Environment
The Expectations
Gap
International
Accounting
Standards
Ethics
Characteristics
Characteristics of
of Accounting
Accounting
Essential characteristics of accounting
are:
(1) the identification, measurement, and
communication of financial
information about
(2) economic entities to
(3) interested parties.
parties
Chapter
1-4
LO 1 Identify the major financial statements and other means of financial
reporting..
Characteristics
Characteristics of
of Accounting
Accounting
Economic Entity
Financial Statements
Additional Information
Financial
Information
Balance Sheet
President’s letter
Income Statement
Prospectuses,
Statement of Cash
Flows
SEC Reporting
Accounting?
Identifies
and
Measures
and
Communicat
es
Chapter
1-5
News releases
Statement of
Owners’ or
Stockholders’
Equity
Environmental
Reports
Note Disclosures
Etc.
GAAP
Not GAAP
Forecasts
LO 1 Identify the major financial statements and other means of financial
reporting..
Characteristics
Characteristics of
of Accounting
Accounting
Review
What is the purpose of information presented in
notes to the financial statements?
a. To provide disclosure required by generally
accepted accounting principles.
b. To correct improper presentation in the financial
statements.
c. To provide recognition of amounts not included
in the totals of the financial statements.
d. To present management’s responses to auditor
comments.
Chapter
1-6
LO 1 Identify the major financial statements and other means of financial
reporting..
Accounting
Accounting and
and Capital
Capital Allocation
Allocation
Resources are limited. Efficient use of resources often
determines whether a business thrives.
Illustration 1-1
Capital Allocation
Process
Financial
Financial
Reporting
Reporting
Information to help
users with capital
allocation decisions.
Chapter
1-7
Users
Users
Capital
Capital Allocation
Allocation
Investors, creditors,
and other users
The process of
determining how and
at what cost money
is allocated among
competing interests.
LO 2 Explain how accounting assists in the efficient use of scare
Accounting
Accounting and
and Capital
Capital Allocation
Allocation
Review
An effective process of capital allocation is critical to
a healthy economy, which
a. promotes productivity.
b. encourages innovation.
c. provides an efficient and liquid market for
buying and selling securities.
d. All of the above.
Chapter
1-8
LO 2 Explain how accounting assists in the efficient use of scare
Challenges
Challenges Facing
Facing Financial
Financial
Accounting
Accounting
Non-financial Measurements
Forward-looking Information
Soft Assets
Timeliness
Chapter
1-9
LO 3 Describe some of the challenges facing accounting.
Objectives
Objectives of
of Financial
Financial Accounting
Accounting
Financial
Financialreporting
reportingshould
shouldprovide
provideinformation:
information:
(a)
(a) that
that is
is useful
useful to
to present
present and
and potential
potential investors
investors and
and
creditors
creditors and
and other
other users
users in
in making
making rational
rational
investment,
investment, credit,
credit, and
and similar
similar decisions.
decisions.
(b)
(b) to
to help
help present
present and
and potential
potential investors
investors and
and creditors
creditors
and
and other
other users
users in
in assessing
assessing the
the amounts,
amounts, timing,
timing, and
and
uncertainty
uncertainty of
of prospective
prospective cash
cash receipts.
receipts.
(c)
(c) about
about the
the economic
economic resources
resources of
of an
an enterprise,
enterprise, the
the
claims
claims to
to those
those resources,
resources, and
and the
the effects
effects of
of
transactions,
transactions, events,
events, and
and circumstances
circumstances that
that change
change
its
its resources
resources and
and claims
claims to
to those
those resources.
resources.
Chapter
1-10
LO 4 List the objectives of financial reporting.
Objectives
Objectives of
of Financial
Financial Accounting
Accounting
Review
All of the following are objectives of financial
reporting except to provide information
a. About enterprise resources, claims to those
resources, and changes in them.
b. That is useful in investment and credit decisions.
c. About the management and major shareholders of
an enterprise.
d. That is useful in assessing cash flow prospects.
Chapter
1-11
LO 4 List the objectives of financial reporting.
Need
Need to
to Develop
Develop Standards
Standards
Financial Statements
Various users
need financial
information
Balance Sheet
Income Statement
Statement of Stockholders’
Equity
Statement of Cash Flows
Note Disclosure
The accounting profession
has attempted to develop
a set of standards that are
generally accepted and
universally practiced.
Chapter
1-12
Generally
Accepted
Accounting
Principles (GAAP)
LO 5 Explain the need for accounting standards.
Parties
Parties Involved
Involved in
in Standard
Standard Setting
Setting
Four organizations:
•
Securities and Exchange Commission (SEC)
American Institute of Certified Public
Accountants (AICPA)
•
Financial Accounting Standards Board (FASB)
•
Government Accounting Standards Board
(GASB)
•
Chapter
1-13
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Securities
Securities and
and Exchange
Exchange
Commission
Commission
Established by federal government
Accounting and reporting for public companies
Securities
Securities
Act
Act of
of 1933
1933
Securities
Securities
Act
Act of
of 1934
1934
Encouraged private standard-setting body
SEC requires public companies to adhere to
GAAP
SEC Oversight
Enforcement Authority
Chapter
1-14
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
American
American Institute
Institute of
of CPAs
CPAs
National professional organization
Established the following:
Committee
Committee on
on
Accounting
Accounting
Procedures
Procedures
Chapter
1-15
Accounting
Accounting
Principles
Principles Board
Board
1939 to 1959
1959 to 1973
Issued 51 Accounting
Research Bulletins
(ARBs)
Issued 31 Accounting
Principle Board
Opinions (APBOs)
Problem-by-problem
approach failed
Wheat Committee
recommendations
adopted in 1973
http://www.aicpa.org/
LO 6
Financial
Financial Accounting
Accounting Standards
Standards
Board
Board
Wheat Committee’s recommendations resulted in the creation
of a the Financial Accounting Standards Board in 1973.
Financial
Accounting
Foundation
Chapter
1-16
Selects members of the FASB
Funds their activities
Exercises general oversight.
Financial
Accounting
Standards Board
Mission to establish and
improve standards of financial
accounting and reporting.
Financial
Financial Accounting
Accounting
Standards
Standards Advisory
Advisory
Council
Council
Consult on major policy issues.
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Financial
Financial Accounting
Accounting Standards
Standards
Board
Board
Missions is to establish and improve standards of
financial accounting and reporting. Differences
between FASB and APB include:
Smaller Membership
Full-time, Remunerated Membership
Greater Autonomy
Increased Independence
Broader Representation
http://www.fasb.org/
Chapter
1-17
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Financial
Financial Accounting
Accounting Standards
Standards
Board
Board
Review
The first step taken in the establishment of a
typical FASB statement is
a. The board conducts research and analysis and a
discussion memorandum is issued.
b. A public hearing on the proposed standard is held.
c. The board evaluates the research and public
response and issues an exposure draft.
d. Topics are identified and placed on the board’s
agenda.
Chapter
1-18
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Due
Due Process
Process
FASB relies on two basic premises:
Responsive to entire economic community
(2) Operate in full view of the public
(1)
Step 1 =
Topic placed on agenda
Step 2 =
Research conducted and Discussion
Memorandum issued.
Step 3 =
Public hearing
Step 4 =
Board evaluates research, public response
and issues Exposure Draft
Step 5 =
Board evaluates responses and issues final
Statement of Financial Accounting Standard
Chapter
1-19
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Types
Types of
of Pronouncements
Pronouncements
Issued by the FASB:
Standards, Interpretations, and Staff Positions.
Financial Accounting Concepts
Emerging Issues Task Force Statements
Chapter
1-20
LO 6 Identify the major policy-setting bodies
and their role in the standard-setting
Governmental
Governmental Accounting
Accounting Standards
Standards
Board
Created in 1984 to addressBoard
state and local governmental
reporting issues.
Chapter
1-21
Financial
Accounting
Foundation
Financial
Accounting
Standards Board
Governmental
Accounting
Standards Board
Financial
Financial Accounting
Accounting
Standards
Standards Advisory
Advisory
Council
Council
Governmental
Governmental
Accounting
Accounting
Standards
Standards Advisory
Advisory
Council
Council
http://www.gasb.org/
LO 6
Generally
Generally Accepted
Accepted Accounting
Accounting
Principles
Principles
Those principles that have substantial
authoritative support.
Major sources of GAAP are:
FASB Standards, Interpretations, and Staff Positions
APB Opinions
AICPA Accounting Research Bulletins
Chapter
1-22
LO 7 Explain the meaning of generally accepted accounting
House
House of
of GAAP
GAAP
AICPA Accounting
Interpretations
FASB Implementation
Guides
Recognized Industry
Practices
Category D (Least Authoritative)
FASB Emerging Issues Task Force
AICPA AcSEC Practice Bulletins
Category C
AICPA Industry Audit
and Accounting
Guides
FASB Technical
Bulletins
AICPA Statements of
Position
Category B
FASB
FASB Statements,
Statements,
Interpretations, and
Staff Positions
Chapter
1-23
APB
APB Opinions
Opinions
CAP Accounting
Research Bulletins
Category A (Most Authoritative)
LO 7
Generally
Generally Accepted
Accepted Accounting
Accounting
Principles
Principles
Review
Which of the following accounting pronouncements
is the most authoritative?
a. FASB Statement of Financial Accounting Concepts.
b. FASB Technical Bulletins.
c. AICPA Accounting Principles Board Opinion.
d. AICPA Statement of Position.
Chapter
1-24
LO 7 Explain the meaning of generally accepted accounting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Standard Setting in a Political
Environment
Accounting standards are as much a product of
political action as they are of careful logic or
empirical findings.
Chapter
1-25
LO 8 Describe the impact of user groups on the standard-setting
Standard
Setting
Business
BusinessEntities
Entities
CPAs
CPAsand
and
Accounting
AccountingFirms
Firms
AICPA
AICPA(AcSEC)
(AcSEC)
Financial
Financial
Community
Community
FASB
FASB
Academicians
Academicians
Investing
InvestingPublic
Public
Accounting standards,
interpretations, and bulletins
Chapter
1-26
Illustration 1-5 User
Groups that Influence
Accounting Standards
Preparers
Preparers
(e.g.,
(e.g.,FEI)
FEI)
Government
Government
(SEC,
(SEC,IRS,
IRS,other
other
agencies)
agencies)
Industry
Industry
Associations
Associations
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Review:
All those who serve on the FASB must be
Certified Public Accountants.
False
Chapter
1-27
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Expectation Gap
What the public thinks accountants should do vs.
what accountants think they can do.
Difficult to close
Sarbanes-Oxley Act (2002)
Public Company Accounting Oversight Board
(PCAOB)
Chapter
1-28
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
International Accounting Standards
Two sets of standards accepted for international
use:
U.S. GAAP, issued by the FASB
International Financial Reporting Standards
(IFRS), issued by the IASB
FASB and IASB recognize that global markets will best
be served if only one set of GAAP is used.
Chapter
1-29
LO 8 Describe the impact of user groups on the standard-setting
Issues
Issues in
in Financial
Financial Reporting
Reporting
Ethics in the Environment of Financial
Accounting
In accounting, we frequently encounter ethical
dilemmas.
GAAP does not always provide an answer
Doing the right thing is not always easy or
obvious
Chapter
1-30
LO 9 Understand issues related to ethics and financial
Copyright
Copyright
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information contained herein.
Chapter
1-31