300003 Flashcards
Which of the following statements most correctly describes the SEC’s standard-setting authority?
The SEC deals only with exports.
None of the answer choices are correct.
The SEC generates U.S. GAAP.
The SEC has the authority to establish accounting standards, but it has generally deferred to the FASB to generate U.S. GAAP.
The Securities and Exchange Commission (SEC) is a governmental entity created to protect the interest of investors by ensuring full and adequate disclosure by publicly traded companies. Although the SEC has the authority to establish standards, it has generally deferred to the Financial Accounting Standards Board (FASB) or its predecessors to generate U.S. accounting standards.
Authoritative Bodies
Authoritative bodies are those bodies recognized as authoritative sources of accounting standards. The Council of the American Institute of Certified Public Accountants (AICPA) has issued a resolution that designates the authority for the standards covered by the Compliance with Standards Rule (ET 1.310.001) and Accounting Principles Rule (ET 1.320.001) of the AICPA Code of Professional Conduct. These are included in Appendix A of the Code. The authoritative bodies are as follows:
Financial Accounting Standards Board (FASB)
Governmental Accounting Standards Board (GASB)
Public Company Accounting Oversight Board (PCAOB)
International Accounting Standards Board (IASB)
AICPA committees and boards:
Accounting and Review Services Committee (ARSC)
Auditing Standards Board (ASB)
Management Consulting Services Executive Committee
Attestation Standards
Tax Executive Committee
Forensics and Valuation Services Executive Committee
Personal Financial Planning Executive Committee
Federal Accounting Standards Advisory Board (FASAB)
(Note that the Internal Revenue Service (IRS) and Securities and Exchange Commission (SEC) are not included as authoritative bodies.)
Appendix A of the Internal Revenue Code (IRC) contains a resolution designating the FASB as the body to establish accounting principles. The resolution also refers to Accounting Research Bulletins (ARBs) and Opinions of the Accounting Principles Board that were issued prior to the creation of the FASB. These shall also be considered generally accepted accounting principles until they have been superseded. Furthermore, Appendix A contains a resolution designating the GASB as the body to establish accounting principles for state and local governmental entities and the three committees of AICPA as the bodies to establish attestation (audit) standards.
The Compliance with Standards Rule and Accounting Principles Rule, which refer to the standards promulgated by authoritative bodies, read as follows:
Compliance with Standards Rule (ET 1.310.001): “A member who performs auditing, review, compilation, management consulting, tax, or other professional services shall comply with standards promulgated by bodies designated by Council.”
Accounting Principles Rule (ET 1.320.001): “A member shall not (1) express an opinion or state affirmatively that financial statements or other financial data of any entity are presented in conformity with generally accepted accounting principles or (2) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from an accounting principle promulgated by the bodies designated by Council to establish such principles that has a material effect on the statements or data taken as a whole. If, however, the statements or data contain such a departure and the member can demonstrate that due to unusual circumstances the financial statements or data would otherwise have been misleading, the member can comply with the rule by describing the departure, its approximate effects, if practicable, and the reasons why compliance with the principle would result in a misleading statement.”
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) is a federal government agency charged with the responsibility of writing rules consistent with federal security laws, investigation of violations, maintenance of financial disclosure documentation, and initiation of action against violators of federal securities acts. The SEC’s main office is in Washington, D.C., but it has “enforcement” and field offices all over the country.
The SEC is charged with the oversight of the Federal Securities Act of 1933, the Federal Securities Exchange Act of 1934, and the Foreign Corrupt Practices Act. The agency serves to govern the registration, offering, sale, etc. of stocks, bonds, notes, convertible debentures, warrants, or other financial documents involving investments and purchases. In addition to writing regulations, the SEC reviews registration statements for compliance with disclosure requirements. The SEC does not determine whether the information provided to investors is accurate or truthful, nor does the SEC determine whether the terms of the offering are fair or reasonable to investors. The mission of the SEC is to protect the integrity of capital markets through enforcement of financial disclosure laws that apply when a business entity attempts to raise capital by selling ownership to investors. The SEC defines what information prospective investors must receive from offerors and what information the entities must continue to report to their shareholders if the entity has a certain number of owners.
2141.01
Form 10-K is the required annual report. It provides a comprehensive report of a company’s business and financial condition, including audited financial statements. This form must be filed with the SEC based on the following schedule:
Revised Deadlines for Filing Periodic Reports
Category of Filer Form 10-K Deadline Form 10-Q Deadline
Large Accelerated 75 days for fiscal years 40 days
Filer (float of ending before December 15,
$700MM or more) 2006, and 60 days for
fiscal years ending on or
after December 15, 2006
Accelerated Filer 75 days 40 days
(float of $75MM to
less than $700MM and
at least $100MM
in annual revenue)
Non-accelerated Filer 90 days 45 days
(float of less than
$75MM or less than
$100MM in annual
revenue)
The form must also be available on the company's website. A typical complete document is over 100 pages. Information required on a Form 10-K includes the following:
Exact name of registrant as specified in its charter
State or other jurisdiction of incorporation or organization
IRS Employer Identification Number
Address and telephone number
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
Name of exchange on which registered (NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
Title of each class
The aggregate market value of shares held by nonaffiliates of the registrant
Business
Risk factors
Unresolved staff comments
Properties
Legal proceedings
Submission of matters to a vote of security holders
Market for registrant’s common equity, related stockholder matters, and issuer purchases of equity securities
Selected financial data
Management’s discussion and analysis of financial condition and results of operation
Quantitative and qualitative disclosures about market risk
Financial statements and supplementary data
Changes in and disagreements with accountants on accounting and financial disclosure
Controls and procedures
Directors, executive officers, and corporate governance
Executive compensation
Security ownership of certain beneficial owners and management and related stockholder matters
Certain relationships and related transactions, and director independence
Principal accounting fees and services
Exhibits and financial statement schedules
ASR 150
SA (15 USC 77a)
SEA (15 USC 78a)
