Intermediate Acct Ch 1

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Intermediate Acct Ch 1
2013-09-02 19:47:39
Intermediate Acct

Intermediate Acct Ch 1
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  1. Financial Accounting
    The process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties.
  2. Financial statements
    balance sheet, income statement, statement of cash flows, statement of owners' equity
  3. Objective (or purpose) of financial reporting
    provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entity.
  4. general-purpose financial statements
    provide financial reporting information to t wide variety of users
  5. entity perspective
    companies are viewed as separate and distinct from their owners (present shareholders)
  6. Proprietary perspective
    a perspective that financial reporting should be focused only on the needs of shareholders
  7. FASB
    Financial Accounting Standards Board - develops accounting standards
  8. American Institute of Certified Public Accountants (AICPA)
    national professional organization of practicing CPAs - an important contributor to the development of GAAP
  9. Accounting Standards Updates
    Updates by FASB that amend the Accounting Standards Codification, which represents the source of authoritative accounting standards
  10. Emerging Issues Task Force (EITF)
    developed by FASB in 1984; representatives from CPA firms and financial statement preparers; purpose is to reach a consensus on how to account for new and unusual financial transactions that may potentially create differing financial reporting practices.
  11. Groups that influence the formulation of accounting standards
    • Business entities
    • CPAs and Accounting firms
    • AICPA
    • Academicians
    • Investing public
    • Financial community (analysts, bankers, etc.)
    • Preparers (financial executives institute)
    • Government (SEC, IRS, etc.)
    • Industry associations
  12. economic consequences
    impact of accounting reports on the wealth positions of issuers and users of financial information and the decision-making behavior resulting from that impact
  13. Sarbanes-Oxley Act
    • Established an oversight board - Public Company Accounting Oversight Board (PCAOB)
    • Implements stronger independence rules for auditors
    • Requires CEOs and CFOs to personally certify that financial statements and disclosures are accurate and complete
    • Requires audit committees to be comprised of independent members and members with financial expertise
    • Requires codes of ethics for senior financial officers
  14. expectations gap
    what the public thinks accountants should do and what accountants think they can do
  15. IFRS
    International Financial Reporting Standards
  16. Due process of FASB
    • Topics identified
    • research and analysis conducted and preliminary views of pros and cons issued
    • public hearing on proposed standard
    • board evaluate research and public response and issues exposure draft
    • Board evaluates responses and changes exposure draft if necessary; final standard issued
  17. Two major types of pronouncements from the FASB
    • Accounting Standards Updates
    • Financial Accounting Concepts
  18. Financial Reporting Challenges
    • Nonfinancial measurements
    • Forward looking information
    • Soft Assets
    • Timeliness
    • Understandability