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Lesson 2: FASB and Standard Setting
Terms in this set (14)
Generally Accepted Accounting Principles (GAAP)
The rules of financial reporting for business enterprises. GAAP are also called accounting standards.
GAAP affects what is disclosed in financial statements and in what amount. For example, GAAP requires that many assets be reported at their historical cost, rather than at current market value
Concerns the dollar amount assigned to an item.
Many unrecognized amounts are reported in the footnotes to complete the portrayal of the firm's financial position and performance.
Financial Accounting Standards Board (FASB)
The FASB is currently the standard-setting body in the United States. Submits exposure draft to SEC. FAF has authority over them
Securities and Exchange Commission (SEC)
Ovesees public companies listed on the stock exchange. They do have the power to enact standards and overturn existing ones
American Institute of Certified Public Accountants (AICPA)
is the national professional organization for practicing CPAs and has had a great impact on accounting principles over the years.
Financial Accounting Foundation (FAF)
Appoints the members of the FASB and its advisory councils, ensures adequate funding for the FASB, and exercises oversight over the FASB.
Financial Accounting Standards Advisory Council (FSAC)
Provides guidance on major policy issues, project priorities, and the formation of task forces.
What comprises United States generally accepted accounting principles (GAAP)?
1. Financial Accounting Standards Board (FASB) Accounting Standards Codification
2. Securities and Exchange Commission (SEC) pronouncements are also GAAP.
What are the first three steps the Financial Accounting Standards Board (FASB) uses when issuing a new accounting standard?
1. Considers whether to add a project to its agenda in consultation with the Financial Accounting Foundation (FAF).
2. Conducts research.
3. Holds a public hearing on the topic.
What does the Securities and Exchange Commission (SEC) do?
administers the U.S. securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.
What are the final three steps in the standard-setting process?
1. Evaluate research and comments from interested parties and issue an exposure draft.
2. Solicit additional comments.
3. Finalize new accounting guidance and issue Accounting Standards Updates (ASUs).
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 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.
THIS SET IS OFTEN IN FOLDERS WITH...
Lesson 3: Accrual Accounting
Lesson 4: Financial Statements
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