FAR-Role and Standard-Setting Process
Terms in this set (38)
What is the Financial Accounting Standards Board (FASB)?
The FASB establishes financial accounting standards for business entities.
What are the first three steps the Financial Accounting Standards Board (FASB) uses when issuing a new accounting standard?
a. Considers whether to add a project to its agenda in consultation with the Financial Accounting Foundation (FAF).
b. Conducts research.
c. 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.
What comprises United States generally accepted accounting principles (GAAP)?
The Financial Accounting Standards Board (FASB) Accounting Standards Codification comprise authoritative U.S. GAAP for publicly traded companies. Securities and Exchange Commission (SEC) pronouncements are also GAAP.
What does the Securities and Exchange Commission (SEC) do?
It administers the U.S. securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.
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 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.
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 are the final three steps in the standard-setting process?
a. Evaluate research and comments from interested parties and issue an exposure draft.
b. Solicit additional comments.
c. Finalize new accounting guidance and issue Accounting Standards Updates (ASUs).
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 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 and Exchange Commission guidance.
What topics does the Financial Accounting Standards Board (FASB) Accounting Standards Codification not include?
a. Other comprehensive basis of accounting
b. Cash basis
c. Income tax basis
d. 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.
Which agency enforces generally accepted accounting principles (GAAP)?
The Securities and Exchange Commission (SEC)
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 usable for more than one year.
What does generally accepted accounting principles (GAAP) address?
Recognition, measurement, and disclosure
What is the Accounting Principles Board?
The entity that published 31 opinions, some of which are now part of the Codification.
What is the classification of assets that are in the form of cash, or will be converted into cash, or will be consumed within one year or the operating cycle of the business, whichever is longer?
The classification is current assets.
What are the seven key components of the general-purpose external financial report?
a. Income statement
b. Balance sheet
c. Statement of cash flows
d. Statement of retained earnings
e. Statement of comprehensive income
f. Footnote disclosures
g. Auditor's opinion
What body developed generally accepted accounting principles (GAAP)?
The Financial Accounting Standards Board (FASB)
When are expenses recognized under accrual accounting?
Expenses are recognized when incurred, regardless of the period of cash payment.
How are liabilities presented on the balance sheet?
Liabilities are shown in order of maturity. Current liabilities are presented first, and then long-term liabilities are presented.
What are cash equivalents?
Short-term investments that are convertible into a known and fixed amount of cash and have an original maturity to the purchaser of three months or less
What approach is used when financial statements are prepared?
The all-inclusive approach
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
What is the purpose of the statement of cash flows?
To explain the change in cash and cash equivalents that has occurred during the past accounting year
How are assets presented on the balance sheet?
Assets are presented in order of decreasing liquidity. The most liquid assets (such as cash) are shown first, and less liquid assets are shown last (such as property, plant and equipment).
Name the two different formats of presentation for the balance sheet.
a. Account form
b. Report form
How are long-term assets and liabilities defined?
By exclusion from current assets and current liabilities
How is owner's equity presented on the balance sheet?
In order of permanence
Where and how are prior-period adjustments shown?
They are shown on the statement of retained earnings as adjustments to the beginning balance of retained earnings in the year that the error is discovered.
What are the categories that are listed on the statement of cash flows?
What are the items in other comprehensive income?
a. Unrealized gains and losses on investments in securities available for sale,
b. certain pension cost adjustments,
c. foreign currency translation adjustments,
d. and unrealized gains and losses on certain hedging activities
What is the lowest structure of the Financial Accounting Standards Board (FASB) Accounting Standards Codification?
The lowest structure is paragraphs.
What is the reason for the Financial Accounting Standards Board (FASB) Accounting Standards Codification?
To put all accounting guidance in one place
What are the major areas in the Financial Accounting Standards Board (FASB) Accounting Standards Codification?
a. General principles 100
b. Presentation 200
c. Assets 300
d. Liabilities 400
e. Equity 500
f. Revenue 600
g. Expenses 700
h. Broad transactions 800
i. Industry 900
How are changes to the Financial Accounting Standards Board (FASB) Accounting Standards Codification accomplished?
Through Accounting Standards Updates (ASU)
What is the highest structure of the Financial Accounting Standards Board (FASB) Accounting Standards Codification?
The highest structure is areas.
YOU MIGHT ALSO LIKE...
Series 7 Top-Off Exam Preparation | Knopman Marks Guide
Intermediate Acct ch1
FAR: 1-Conceptual Framework
OTHER SETS BY THIS CREATOR
FAR- US Securities & Exchange
FAR-Fair Value Framework
FAR-Conceptual Framework of Financial Reporting by Business Enterprises
International Auditing Issues & Professional Responsibilities & Independence