FASB and Standard Setting Process Flashcards
What are external users role in FAR?
1) make investment and credit decisions
2) assess the amount and timing of cash flow
3) assess the economic resource and obligation
What are the 3 aspects that GAAP has in FAR?
1) recognition-when they are recorded
2) measurement- how they are recorded
3) disclosure- anything not in the F/S
Organizations in FAR
1) FASB
2) SEC
3) AICPA
FASB
1) Financial Accounting Foundation (FAF)- appoints board members, advertises councils, ensures funding, and exercise oversight
2) Financial Accounting Standards Advisory Council (FASAC)- provides guidance on policy issues, project priorities and formation of task forces
- reinforced by SEC
- private sector body that establishes the GAAP
What is the mission of FASB?
to improve the usefulness of F/R
- addressing deficiencies
- provide international convergence
- improve the common understanding of the nature and purposes of information in financial reports.
- maintain current accounting standards;
Standard Setting Process
1) add project agenda
2) research issues discussion memo
3) public hearing
4) issue ED (exposure draft)
5) modifies ED
6) finalizes and issues Accounting Standards Update (ASU)
SEC
- formed by congress in 1933
- authority to establish GAAP but SEC relinquishes that talk into private sector FASB
- enforcement authority
AICPA
- prof org of CPA
- substantial input into the standard setting process
- all past standards setting bodies were created by AICPA
What is the difference between managerial accounting and financial accounting?
managerial- internal/ NO GAAP
negative economic consequences
inability to raise capital
In order for a new statement to be issued, what has to happen?
at least 4 of 7 members of FASB must vote in favor of Statement of Financial Acc Standards
