Essay on ACCT 3511

Submitted By jhfdu3839
Words: 2230
Pages: 9

Chapter 1 & 2 Concept Solutions-Fin.Accting Standards-Professor Marco J. Malandra, CPA
(Kieso 13th Edition Page / Kieso 14th Edition if Page is different) mjm 8/28/11

Chapter 1: Financial Accounting (FA), Financial Statements (FS) & Accounting Standards

1. What fields of accounting are geared to external vs internal users? Who are these users?
Financial accounting (FA)  creditors, investors
Managerial  Co. managers/executives

2. Who pays when FS are misleading? What’s “Enronitis”? What the purpose of FS vs CPA’s? all pay if capital is invested in wasteful companies which leads to a poorer economy
Enronitis – distrust in accounting leads to a decline in the stock price
FS purpose – so investors can make good decisions
CPA’s purpose – independent examiner of FS

3. Name 4 FS’s & explain accrual vs cash basis accounting & which is used for FS’s?

1. The balance sheet
2. The income statement
3. The statement of cash flows
4. Statement of owners or stockholders equity
Accrual – Balance sheet, income statement, statement of stockholders equity
Cash – statement of cash flows
Record revenue when cash is received and expenses when cash is paid

4. What type of improvements might FASB make to financial reporting by the year 2020?
Nonfinancial measurements – customer satisfaction indexes, backlog info, rejection rates on goods purchased and results of companies sustainability efforts
Forward looking info – fail to provide this “once upon a time”
Soft assets – intangibles supply chain management, brand image, know-how and market dominance
Timelines – need real time financial statement info

5. What are the rules of FS’s called? Who writes vs enforces them & to whom do they apply? Rules are called GAAP
FASB v. SEC writes and enforces them
Only apply to public corporations

6. Explain: FASB vs. APB (See Pg 10) & FASB’s due process for new GAAP (See Pg 11)?

Seven members
Members are well paid full time members appointed for enewable 5 yr terms
Not part of any single professional organization but is appointed by and answerable to the financial acct foundation
Members must sever all ties to firms companies and insitutions
Don’t have to be a CPA

18 members
Members are volunteer their part time work
Was a senior committee of the AICPA
Members retained private positions in firms companies and institutions
Members required to be CPA and members of AICPA

Due process – the FASB should be responsive to needs and views of entire econ community and operate in full view of public through due process
Topics identified and placed on boards agenda
Research and analysis conducted and preliminary views of pros and cons issued
Public hearing on proposed standard
Board evaluates research and public response and issues exposure draft
Board evaluates responses and changes exposure draft if necessary final standard issued
(basically draft issues and hearings on proposed standards )

7. What organization administers the CPA Exam? Who develops auditing (vs FA) standards?)
AICPa creates the Unified CPA exam
Public Co Accounting oversight board develops auditing

8. What was authoritative GAAP(Pg 13/14)? What’s the Codification & AICPA Rule 203?

authoritative GAAP- we use the codification framework because GAAP varied in format and completemess and structure and were sometimes inconsistent and difficult to interpret
FASB’S Codification research system – framework to provide in one place all the authoritative literature related to a particular topic simplify access to authoritative U.S GAAP / consolidates and organizes all GAAP by topic online for research ease
AICPA rule 203- prohibits a member from expressing an unqualified opinion on financial statements that contain a material depatture from GAAP

9. Who enacted the