Accounting Pronouncements: Staff Positions
Issued by: FASB
Provides additional guidance on implementing or applying FASB Standards or Interpretations. Authoritative GAAP.
Accounting Pronouncements: Interpretations (FASB)
Issued by: FASB
Represent extensions or modifications of existing standards. Authoritative GAAP. Requires 4 of 7 votes
Accounting Pronouncements: SFAS
(SFAS) Statement of Financial Accounting Standards
Issued by FASB
Requires 4 of 7 votes
Accounting Pronouncements: EITF Statements
(EITF) Emerging Issues Task Force
Issued by FASB
Provides guidance on how to account for new and unusual financial transactions that have the potential for creating diversity in financial reporting practices. Resolves issues quickly. FASB reviews & approves and SEC views them as preferred accounting on emerging issues not covered.
Accounting Pronouncements: Opinions
APBO - Accounting Principles Board Opinions - 1959 - 1973.
Issued by APB
Accounting Pronouncements: SFAC
(SFAC) Statements of Financial Accounting Concepts
Issued by FASB
does not establish GAAP- they are more the rules of GAAP. Sets forth fundamental objectives and concepts that will be used in developing future standards
American Institute of Certified Public Accountants. No longer issues authoritative accounting guidance. Develops & grades the CPA exam. Has a code of professional conduct.
Committee on Accounting Procedure - 1939 - 1959
Appointed by AICPA
Composed of practicing CPAs
Issued 51 Accounting Research Bulletins (ARBs)
ARB - Accounting Research Bulletin
1939 - 1959. Issue by CAP
APB - Accounting Principles Board
Issued APBO - 31 opinions
Wheat committee study killed APB
Financial Accounting Foundation
selects members of FASB & advisory council FASAC
Funds FASB & FASAC, Oversees FASB's activities
FASAC: Financial Accounting Standards Advisory Committee
Consults with FASB on policy & tech issues, helps select task force members.
AICPA written communications: SOP - Statements of Position
Provides guidance on financial reporting topics until the FASB sets standards on the issue in question.
GAAP - Generally Accepted Accounting Principles
substantial authoritative support,
Certified Public Accountant
FASB: Financial Accounting Standards Board
Security and Exchange Commission
Relies on the FASB to develop accounting stds
SECs role varies -
International Accounting Standards Board
from London. Issues IFRS
PCAOB - Public Company Accounting Oversight Board - established by the Sarbanes-Oxley Act 2002
IASB - composed of 4 organizations
1. IASCF - Int'l Acctng Stds Committee Foundation
2. IASB - International Accounting Standards Board
3. Standards Advisory Council
4. Int'l Financial Reporting, Interpretations Committee (IFRIC)
3 types of IFRS pronouncements
1. IFRS - int'l fin reporting stds
2. Framework - Framework for financial reporting
3. Int'l financial reporting interpretations
Hierarchy of IFRS
2. Int'l Acctng Stds
3. Interpretations originated by the Int'l Fin. Reporting Interpretations committee (IFRIC) or the former standing interpretations committee (SIC)
Difference in financial & managerial accounting?
Users: (financial) Internal & external (investors, creditors, etc
(managerial) Internal management only
List most common financial statements
Statement of Cash Flows
Statement of Stockholder's equity
What is the objective of financial reporting?
To provide financial information about the reporting entity that is useful to present and potential equity investors, lendors, and other creditors.
Name examples of Financial Reporting (not statements)
Due Process - steps to establish a financial accounting standard
1. Topics identified & placed on boards' agenda
3. Public hearing on the proposed standard
4. Board evaluates research & public response
5. Board issues exposure draft
6. Board evaluates responses
7. Final standard issued
FASB Types of Pronouncements
1. Standards, Interpretations, Staff positions
2. Financial Accounting Concepts (rules that make gaap)
3. EITF stmts
AICPA types of written communication
1. Audit & Accounting Guides
2. Statements of Position
3. Practice Bulletins - AcSECs view on narrow financial reporting issues not considered by the FASB
What if Codification does not cover a specific event or transaction?
Refer to other accounting literature if not covered by codification
what the public thinks accountants should do & what accountants think they an do.
SFAC No 1
Objectives of financial reporting by business enterprises.
Goals & Purposes of Accounting
1) useful in investment & credit decisions
2) useful in assessing future cash flow
3) useful in assessing enterprise's resources, debt & equity claims on the resources, & changes in them
SFAC No 2
Qualitative Characteristics of Accounting Information
A. Financial Info must be: (U-RR-Comcon matless)
7. Benefits outweigh costs
B. Hierarchy of Acctng Qualities:
1. users of acctng info (decision makers)
2. pervasive constraint (B) (benefits>cost)
3. user-specific qualities (U) (understandability) (decision usefulness)
4. primary decision specific qualities (D) (Relevance & Reliability)
5. ingredients of primary qualities (Predictive value, Feedback Value, Timeliness - all go to relevance). Verifiability, Faithfulness, Neutrality all go to reliability)
6. secondary & interactive qualities (comparability & consistency)
7. threshold for recognition (materiality)
SFAC No 3
Elements of Financial Stmts of Business Enterprises
** replaced by SFAC No 6**
SFAC No 4
Objectives of Financial Reporting for Nonbusiness Organizations
SFAC No 5
Recognition and Measurement in Financial Statements of Business Enterprises
What should be in the financial statements, & recognition criteria
Full set of financial stmts includes:
a. Statement of financial position - balance sheet
b. Statement of earnings - income statement
c. Statement of Comprehensive Income
d. Statement of cash flows
e. Statement of changes in owners equity
SFAC No 6
Elements of Financial Statements
Replaces SFAC No 3, expands its scope to include not for profit organizations.
provides definitions & terms for items in the financial statements (assets, liabilities, losses, gains, etc)
SFAC No 7
Using cash flow information & Present Value in acctng measurements.
1. Measurements based on future cash flows only.
2. 5 Elements of PV measurement
a. Estimate of future cash flow
b. Expectations about timing variations of future cash flows.
c. Time value of money
d. Price for bearing uncertainty
e. Other factors (liquidity, market imperfections)
3. Fair Value Objective
4. PV Computations
a. traditional approach
b. expected cash flow approach
5. Liability measurement considers addt'l factors
6. Changes in estimated cash flows usig the cost up approach.
SFAC No 8
Objective of General Purpose Financial Reporting
replaces sfac no 1 & no 2