FAR - Framework/Overview - FASB, Role/Standard Setting, FASB/Standard Setting Flashcards Preview

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Flashcards in FAR - Framework/Overview - FASB, Role/Standard Setting, FASB/Standard Setting Deck (47)
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1

What comprises United States Generally Accepted Accounting Principles (GAAP)?

(FASB) Accounting Standards Codification and (SEC) pronouncements

2

What does the Securities and Exchange Commission (SEC) do?

1) Administers US securities laws
2) Securities Act of 1933
3) Securities Exchange Act of 1934

3

What is the American Institute of Certified Public Accountants (AICPA)?

Professional organization for participating CPAs.

4

What is the role of the Financial Accounting Foundation (FAF)?

1) oversight of (FASB)
2) appoints FASB members
3) ensures funding.

5

First three steps the (FASB) uses when issuing a new accounting standard?

1. Considers to add a project to agenda in consultation with (FAF);
2. Research
3. Public hearing

6

What are the final three steps in the standard setting process?

1. Evaluate research/comments, issue exposure draft
2. Additional comments
3. Finalize acct guidance/issue Acct standards Update (ASU).

7

What is the main purpose of the (SEC)?

Promote efficient allocation of capital by maintaining open, orderly, and fair securities markets.

8

What is the role of the Financial Accounting Advisory Council (FASAC)?

guidance on major policy issues, project priorities, and the formation of task forces.

9

How do user groups influence the outcome of the (FASB) standards?

providing input during the due process procedure.

10

What is the primary protection for investors against fraudulent financial reporting by corporations?

requirement that financial must be audited.

11

The FASB is a(n)

PRIVATE SECTOR BODY - The FASB has no official connection with the U.S. Government although the SEC, an agency of the federal government, can modify or rescind an accounting standard adopted by the FASB.

12

TRUE/FALSE:

It is a violation of SEC regulations for publicly traded companies to depart from GAAP.

TRUE

SEC requires that all registrants provide financial statements that comply with GAAP and will sanction firms and individuals involved in financial reporting that does not comply with GAAP.

13

TRUE/FALSE

GAAP are laws

FALSE

GAAP are principles that are set by a private sector body - the FASB, not proposed and adopted by legislative bodies.

14

TRUE/FALSE

Only publicly traded companies must comply with GAAP.

FALSE

all companies that rely on external sources of capital require financial statements and, therefore, must comply with GAAP.

15

What is the operating procedure for issuing a new (FASB) statement?

new statement issued only after a majority vote (4/7) by the members of the FASB.

16

What group currently writes the Generally Accepted Accounting Principles?

The FASB is currently the rule-making body for GAAP.

17

TRUE/FALSE

New GAAP should be neutral and not favor any particular reporting objective.

TRUE

One of the objectives of the FASB in setting standards is to develop rules that are unbiased.

18

TRUE/FALSE

GAAP should result in the most conservative possible financial statements.

FALSE

Many GAAP principles require accounting that is not the most conservative possible alternative.

19

TRUE/FALSE

GAAP should have little or no cost of compliance.

FALSE

FASB admits that many of their principles impose a significant compliance cost on firms.

20

TRUE/FALSE

The interests of the reporting firms will be a primary consideration when developing new GAAP.

FALSE

The FASB creates standards for the benefit of investors and creditors who want accurate and unbiased information.

21

Generally Accepted Accounting Principles may be described as

GAAP governs what is included in financial statements/how it is presented. GAAP is concerned with what accounts, their amounts, and disclosure

22

Accounting standards, the term "negative economic consequences" includes:

negative economic consequences (cause earnings to fall) become a focal point for arguments against the proposed standard.

23

The purpose of financial accounting is to provide information primarily for which of the following groups?

decision making of investors and creditors.

24

TRUE/FALSE

Managerial accounting has a past focus and financial accounting has a future focus.

FALSE

The opposite is true. Managerial accounting is generally focused on the future, and financial accounting is focused on recording past events.

25

TRUE/FALSE

Managerial accounting need not follow Generally Accepted Accounting Principles (GAAP), while financial accounting must follow them.

TRUE

Managerial accounting - internal use, does not follow GAAP. Financial accounting -external use, and must follow GAAP.

26

Deferred Revenue

When cash is received before the revenue is actually earned, this is deferred revenue

1. Example is when a customer buys a gift card- they’ve given the company money but the company hasn’t earned it yet- this is a liability to the company

27

Accrued Revenue

When revenue is earned before cash is received, this is accrued revenue (accounts receivable)- this is an asset to the company

1. Example is a customer buying items on credit- the company has given the customer the merchandise, but the company has not received actual cash yet

28

Deferred Expense

When cash is paid before expense is incurred, this is a deferred expense and is an asset to the company

1. Example is prepaid rent or prepaid insurance

29

Accrued Expense

When an expense is incurred before cash is paid, this is an accrued expense and is a liability to the company

1. Example is salaries payable- employees are working for two weeks before they are paid, so the company books ‘salaries payable’

30

What are current liabilities?

Liabilities that are due in the upcoming year or the operating cycle of the business, whichever is longer and which will be met through the transfer of a current asset or the creation of another current liability.