Flashcards in Financial Reporting Environmemt Deck (32):
Who Establishes GAAP
Who enforces the Law
Who establishes Federal Accounting Principles ?
Federal Accounting Standard Advisory Board
Government Accounting Standard Board
2 Inherent Control Charateristics
The use of Fund Accounting
The implication of a budget as the expression of policy decisions and legally binding control tool
Principle of Accountability with Government Reporting
Current year revenues should be sufficient to
Economic - entity assumption
Going concern assumption
Monetary unit assumption
Finicial Accounting Foundation
Appoints board members and advisory councils, ensures funding and exercises oversight
Financial Accounting Standards Advisory Council
This group advises the FASB in current and possible new agenda items, and helps with formation of task forces for certain issues
Provides implementation guidance within GAAP
EITF created by FASB
Improve the accounting standards
Standards Settings Process
An item get added to the agenda
Second conduct research and issues a discussion memorandum
Hold public meetings
Evaluate research and comments from interested parties and then issue a Exposure draft.
Solicit addiontinal comments
Finialize the new standard by vote. Need a majority vote from the FASB members
International Accounting Standard Board.
Uniform accountjng standards globally. Benefit is less cost
No need to rewrite the financial statement.
International Financial Reporting Standard
Formed by congress in the 1933 Act
SEC had enforcement authority
SEC delegated authority to GAAP to the FASB
Two Types of GAAP
- FASB Accounting Standard of Codification
- SEC guidance is considered authoritative
- FASB concepts
Regulation S-X applies to the reporting interim and annual financial statements including notes and schedules
Regulation S-K provides disclosures, including many that are non-financial.
Regulation S-K also covers certain aspects of corporate annual reports to shareholders.
Regulation S-B applies to small business issuers and non accelerated filters. This disclosure requirements for smaller companies that file periodic reports and registration statements with the SEC have been reduced.
Interim financial statements must be reviewed by an independent accountant if it is not audited.
Also required ate chnages to the 1/4,
- legal proceedings
- increases, decreases ir changes in securitas or indebtness
- matters submitted to shareholders
- exhibits and reports on Form 8-K
- other material events not reported on form 8-K
Anticipted of new accounting standard
Certified by an independent accountant and signed by the following
- Principal E
Basic Information Package
Standardized Financial Statement
Selected financial information in columnar with preceding 5 years financial trends.
Managements discussion and analysis
Dividens and market prices of common stock
Description of business
Locations and descriptions of physical properties
Security holding of directors and officers holding more than 5%
Matters submitted to shareholders for approval
Description of certain business relationships such as those with related parties.
Is a current report to disclose any material events
-a change in control
- acquisition or disposition of a significant amount of assets not in the ordinary course of business
- bankruptcy or receivership
- resignation of directors
- change in the registrants certifying accountant
Expected Cash Flow Method Overview
- Measurements at initial recognition
- Fresh-Start measurements and
- Applications of the interest method of allocation
Cash Flow information - Objective
The objective is to estimate Fair Value by distinguishing the economic differences between sets of future cash flows often that may vary in time and uncertainty
Cash flow information -Elements
Estimates of future Cash flows
Expected variability of their amount and timing
The time value of money
Calculation of an asset using present value method
1.) The discount peroid( product life cycle)
Not for profit entities
Economic Entity Assumption
The reporting(accounting) entity is seperately identified for the purpose of economic and accountability.
Owners and managers economic affairs are segregated from those of the reporting entity
Going Concern Assumption
Unless evidence indicates otherwise every business is assumed to be a going concern that operates indefinitely. It is assumed the entity will not be liquidated in the near future.
Monetary Unit Measurement
Accounting records are stated in the units of money. The changing purchasing power of the monetary unit is assumed not to be material.
Economic activity can be divided into time periods.
Revenue is recognized in the peroid it is earned.
Full disclosure principles
Financial ststaments should record anything and all information that could influence investors and creditors.