International Financial Reporting Standards and Financial Statements Essays

Submitted By graywhld
Words: 1891
Pages: 8

1. Accounting standard setting and regulatory bodies

a. The purpose of the US Securities and Exchange Commission is to protect investors against fraudulent practices, maintain stable and efficient markets, and facilitate capital formation by enforcing securities laws enacted by Congress. Elisse B. Walter is Chairman of the SEC. The Commissioners are Luis A. Aguilar, Troy A. Paredes, and Daniel M. Gallagher. None of them have a background in accounting nor do any of them have a CPA license. The majority has a background in general corporate and business law.

b. The Financial Accounting Standards Board is its own separate organization that creates financial accounting standards in the private sector and the SEC is to approve of those proposed standards so that the financial statements prepared by nongovernmental agencies are prepared correctly.

c. The PCAOB’s main objective is to protect the investor’s interests by supervising public company audits. They ensure that all reports contain accurate information about each firm. The PCAOB is also a nonprofit corporation. The Chairman since 2011 is James R. Doty. In addtion, the board members consist of: Lewis Ferguson, Jeanette Franzel, Jay Hanson, and Steven Harris. Doty has previous experience working for the SEC as well as a law firm. Interestingly enough, he graduated with a B.A. in History and received his M.A. from Harvard in History as well, going on to get his L.L.B. at Yale Law School. Ms. Franzel is a CPA, and internal auditor, and a certified management accountant. Mr. Hanson is a CPA, too, and has previous experience working with FASB and the AICPA.
d. The IASB is a private-sector, independent standard-setting body operating under the IFRS Foundation but is independent. Its purpose is to develop and approve International Financial Reporting Standards. Hans Hoogervorst is the current Chairman. Patrick Finnegan, Patricia McConnell, Paul Pacter, and John Smith are all from the United States and have previous work experience with American firms. Prabhakar Kalavacherla, from India, has also studied in California and worked for KPMG in San Francisco.

e. An inconsistency among these groups of organizations is between the SEC and the FASB specifically. While the SEC is a federal agency that acts as the authority and establishing body which provides advice and opinions to the private-sector organizations, such as the FASB. Therefore, at times when the FASB develops certain standards, when forwarded on to be approved, the SEC may reject the proposal. There may also be a constrained relationship between the SEC and the other private-sector organizations if the SEC wants to resolve a specific accounting problem

2. The FASB’s Conceptual Framework
a. The two primary qualities of accounting information are relevance and faithful representation. To be relevant information must be capable of making a difference in a decision. Relevance has three ingredients. The first is that the information has predictive value. That is, it helps users predict the ultimate outcomes of events. The second ingredient is confirmatory value. Confirmatory value is relevant as it helps users confirm or correct prior expectations. Third, there is the ingredient of materiality for relevance. This is company specific, but this something is material and needs to be included if omitting it or misstating influences decisions that could be made by users. The second primary quality faithful representation also has three key ingredients. The first being neutrality. This means that companies cannot select information that will favor one interested user party over another. They must be unbiased or the public will lose confidence in its validity. The second ingredient is completeness. This just means that all the information necessary for a company to faithfully representing itself is delivered. Lastly is the ingredient of free from error. All financial numbers presented should be meant to be…