What is the main purpose of the Securities and Exchange Commission (SEC)?
The main purpose of the SEC is to promote efficient allocation of capital by maintaining open, orderly, and fair securities markets.
What is the Financial Accounting Standards Board (FASB)?
The FASB establishes financial accounting standards for business entities.
What is the role of the Financial Accounting Advisory Council (FASAC)?
The FASAC provides guidance on major policy issues, project priorities, and the formation of task forces.
What are the final three steps in the standard setting process?
- Evaluate research and comments from interested parties and issue an exposure draft;
- Solicit additional comments;
- Finalize new accounting guidance and issue Accounting Standards Update (ASU).
What is the role of the Financial Accounting Foundation (FAF)?
The FAF exercises oversight of the Financial Accounting Standards Board (FASB), appoints the members of the FASB, and ensures funding.
How do user groups influence the outcome of the Financial Accounting Standards Board (FASB) standards?
Users influence standards by providing input during the due process procedure.
What comprises United States Generally Accepted Accounting Principles (GAAP)?
- FASB ASC
- US GAAP for publicly traded companies
- SEC pronouncements
What does the Securities and Exchange Commission (SEC) do?
It administers the US securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.
What are the first three steps the Financial Accounting Standards Board (FASB) uses when issuing a new accounting standard?
Considers whether to add a project to its agenda in consultation with the Financial Accounting Foundation (FAF);
Holds a public hearing on the topic.
What is the American Institute of Certified Public Accountants (AICPA)?
The AICPA is the professional organization for participating CPAs.
Which agency enforces Generally Accepted Accounting Principles (GAAP)?
Securities and Exchange Commission (SEC).
What are the seven key components of the general purpose external financial report?
- Income Statement;
- Balance Sheet;
- Statement of Cash Flows;
- Statement of Retained Earnings;
- Statement of Comprehensive Income;
- Footnote Disclosures;
- Auditor's Opinion.
When are expenses recognized under accrual accounting?
Expenses are recognized when incurred, regardless of the period of cash payment.
What is the classification of assets that are in the form of cash, or will be converted into cash, or consumed within one year or the operating cycle of the business, whichever is longer?
The classification is current assets.
What purpose does the Financial Accounting Standards Board (FASB) Accounting Standards Codification serve?
The FASB Accounting Standards Codification is the sole source of authoritative U.S. Generally Accepted Accounting Principles for nongovernmental entities, except for the Securities Exchange Commission guidance.
What does Generally Accepted Accounting Principles (GAAP) address?
What are long-term assets?
Assets that are not classified as current assets. Long-term assets are reported on the balance sheet and represent a company's property, equipment, and other capital assets (reduced by depreciation) expected to be useable for more than one year.
What topics does the Financial Accounting Standards Board (FASB) Accounting Standards Codification not include?
- Other comprehensive basis of accounting;
- Cash basis;
- Income tax basis;
- Regulatory accounting principles.
When is revenue recognized under accrual accounting?
Revenues are recognized when earned and collection is reasonably assured, regardless of the period of cash collection.
What is the Accounting Principles Board?
The entity that published thirty-one opinions, some of which are now part of the Codification.
What body developed Generally Accepted Accounting Principles (GAAP)?
The Financial Accounting Standards Board (FASB).
According to the FASB and IASB conceptual frameworks, useful information must exhibit the
fundamental qualitative characteristics of
- Faithful Representation
The fundamental qualitative characteristics of useful information are relevance and faithful representation.
What is the underlying concept governing the recording of gain contingencies?
Gain contingencies should not be recognized prior to realization as a prudent reaction to the uncertainty surrounding the realization of the gain as reflected in the convention of conservatism.
According to the FASB and IASB conceptual frameworks, the objective of general purpose financial reporting is to:
Provide financial information that is useful to primary users.
The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to the primary users of general purpose financial reports in making decisions about providing resources to the reporting entity.
According to the FASB and IASB conceptual frameworks, completeness is an ingredient of:
"Completely Neutral is Free from Error"
What is FEDPRIA?
Authoritative Literature included in the codification:
What is Regulation for Accounting is Emerging?
What is the goal of the Private Company Council?
What are the ingredients of
- Completely Netrual
- is Free (Unbiased)
- from Error (Error Free)
What are the characteristics of
Define Conservatism in Financial Reporting
Conservatism is a prudent reaction to uncertainty to try to ensure that uncertainty and risks inherent in business situations are adequately considered. Recognition of a contingent loss is the recording of an amount representing uncertainty and risk in a business situation.
Recognition is the process of recording an item in the financial statements of an entity
What is the realization concept?
Revenues and gains are realized when assets are exchanged for cash or claims to cash
Ex: Depreciated equipment was sold in exchange for a note receivable.
What are the Enhancing Qualitative Characteristics of Financial Reporting?
Compare and Verify in Time to Understand
What are the ingredients of Faithful Representation in Financial Reporting?
Completely Neutral is Free from Error
- Free from Error