Chapter 1 Flashcards
(27 cards)
What is Capital Allocation?
The process of determining how and at what cost money is allocated among competing interests.
What are the objectives of financial reporting?
Provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and creditors.
What do general-purpose financial statements provide?
Provide financial reporting information to a wide variety of users and the most useful information possible at the least cost.
Who are the primary user group?
Investors
What is Entity Perspective?
Companies viewed as separate and distinct from their owners.
Decision-Usefulness consists of what?
- Ability to generate net cash inflows
2. Management’s ability to protect and enhance the capital providers’ investments.
Securities and Exchange Commission (SEC)
- Established by federal government
- Accounting and reporting for public companies
- Encouraged Private standard-setting body
- Requires public companies to adhere to GAAP
- Oversight and enforce authority
What did the American Institute of CPAs (AICPA) establish?
- National professional organization
- Committee on Accounting Procedures
- Accounting principles board
What does the committee on accounting procedures consists of?
- 1939-1959
- Issued 51 Accounting Research Bulletins
- Problem-by-problem approach failed
What does the accounting principles board consist of?
- 1959-1973
- Issued 31 Accounting Principle board opinions
- Wheat committee recommendations adopted in 1973
Financial Accounting Standards Board (FASB) was created by?
The wheat committee their recommendations led to their creation.
What are the three parts of FASB?
- Financial Accounting Foundation
- Financial Accounting Standards Board
- Financial Accounting Standards Advisory Council
What does the Financial Accounting Foundation do?
- Selects members of the FASB
- Funds their activities
- Exercises general oversight
What does the Financial Accounting Standards Board do?
-Establish and improve standards of financial accounting and reporting
What does the Financial Accounting Standards Advisory Council do?
-Consult on major policy issues
What is Financial Accounting Standards Board Mission?
-Establish and improve of financial accounting and Reporting.
What are the differences between FASB and APB?
- Smaller membership
- Full-time, remunerated membership
- Greater autonomy
- increased independence
- broader representation
What is the due process system of the FASB?
- Topics identified and placed on Board’s agenda
- Research and analysis conducted and preliminary views of pros and cons issued
- Public hearing on proposed standard
- Board evaluates research and public response and issues exposure draft.
- Board evaluates responses and changes exposure draft if necessary. Final standard issued.
What are the types of pronouncements?
- Standards, interpretations, and staff positions
- Financial Accounting Concepts
- Emerging Issues Task Force Statements
The AICPA established which committee?
-Accounting Standards Executive Committee
What does the Accounting Standards Executive Committee consists of?
- Audit and accounting guides
- Statements of Position
- Practice Bulletins
What are the goals of the FASB codification?
- Provide in one place all the authoritative literature related to a particular topic
- Creates one level of GAAP, which is authoritative
What are the financial reporting challenges?
- non-financial measurements
- Forward-looking information
- soft assets
- timeliness
What is the International Accounting Standards Board responsible for?
- Issues international financial reporting standards (IFRS)
- Standards used on most foreign exchanges
- Standards used by foreign companies listing on U.S. securities exchanges
- Used in over 115 countries
