financail accounting and accounting standards

Views:
 
Category: Entertainment
     
 

Presentation Description

No description available.

Comments

By: maddy4040 (94 month(s) ago)

how to download this ppt

Presentation Transcript

Financial Accounting and Accounting Standards:

Financial Accounting and Accounting Standards Chapter 1 Intermediate Accounting, 12th Edition Kieso, Weygandt, and Warfield Prepared by Coby Harmon, University of California, Santa Barbara

Chapter 1 Learning Objectives:

Identify the major financial statements and other means of financial reporting. Explain how accounting assists in the efficient use of scarce resources. Describe some of the challenges facing accounting. List the objectives of financial reporting. Explain the need for accounting standards. Identify the major policy-setting bodies and their role in the standard-setting process. Explain the meaning of generally accepted accounting principles. Describe the impact of user groups on the standard-setting process. Understand issues related to ethics and financial accounting. Chapter 1 Learning Objectives

Slide 3:

Financial Accounting and Accounting Standards Financial Statements and Financial Reporting Accounting and Capital Allocation Challenges Objectives The Need to Develop Standards Parties Involved in Standard Setting Generally Accepted Accounting Principles Issues in Financial Reporting Securities and Exchange Commission (SEC) American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Governmental Accounting Standards Board (GASB) Changing Role of the AICPA Political Environment The Expectations Gap International Accounting Standards Ethics

Characteristics of Accounting:

LO 1 Identify the major financial statements and other means of financial reporting . . Characteristics of Accounting Essential characteristics of accounting are: the identification , measurement , and communication of financial information about economic entities to interested parties .

Characteristics of Accounting:

Financial Information Accounting? Identifies and Measures and Communicates Balance Sheet Income Statement Statement of Cash Flows Statement of Owners’ or Stockholders’ Equity Note Disclosures President’s letter Prospectuses, SEC Reporting News releases Forecasts Environmental Reports Etc. GAAP Not GAAP Financial Statements Additional Information Economic Entity Characteristics of Accounting LO 1 Identify the major financial statements and other means of financial reporting . .

Characteristics of Accounting:

LO 1 Identify the major financial statements and other means of financial reporting . . What is the purpose of information presented in notes to the financial statements? a. To provide disclosure required by generally accepted accounting principles. b. To correct improper presentation in the financial statements. c. To provide recognition of amounts not included in the totals of the financial statements. d. To present management’s responses to auditor comments. Review Characteristics of Accounting

Accounting and Capital Allocation:

Accounting and Capital Allocation Resources are limited . Efficient use of resources often determines whether a business thrives. Financial Reporting Information to help users with capital allocation decisions. Users Investors, creditors, and other users Capital Allocation The process of determining how and at what cost money is allocated among competing interests. LO 2 Explain how accounting assists in the efficient use of scare resources. Illustration 1-1 Capital Allocation Process

Accounting and Capital Allocation:

An effective process of capital allocation is critical to a healthy economy, which a. promotes productivity. b. encourages innovation. c. provides an efficient and liquid market for buying and selling securities. d. All of the above. Accounting and Capital Allocation LO 2 Explain how accounting assists in the efficient use of scare resources. Review

Challenges Facing Financial Accounting:

Challenges Facing Financial Accounting Non-financial Measurements Forward-looking Information Soft Assets Timeliness LO 3 Describe some of the challenges facing accounting.

Objectives of Financial Accounting:

Financial reporting should provide information: (a) that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. (b) to help present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts. (c) about the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events, and circumstances that change its resources and claims to those resources. Objectives of Financial Accounting LO 4 List the objectives of financial reporting.

Objectives of Financial Accounting:

All of the following are objectives of financial reporting except to provide information a. About enterprise resources, claims to those resources, and changes in them. b. That is useful in investment and credit decisions. c. About the management and major shareholders of an enterprise. d. That is useful in assessing cash flow prospects. Objectives of Financial Accounting LO 4 List the objectives of financial reporting. Review

Need to Develop Standards:

Need to Develop Standards Various users need financial information The accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced. Financial Statements Balance Sheet Income Statement Statement of Stockholders’ Equity Statement of Cash Flows Note Disclosure Generally Accepted Accounting Principles (GAAP) LO 5 Explain the need for accounting standards.

Parties Involved in Standard Setting:

Parties Involved in Standard Setting Four organizations: Securities and Exchange Commission (SEC) American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Government Accounting Standards Board (GASB) LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

Securities and Exchange Commission:

Securities Act of 1933 Securities Act of 1934 Securities and Exchange Commission Established by federal government Accounting and reporting for public companies Encouraged private standard-setting body SEC requires public companies to adhere to GAAP SEC Oversight Enforcement Authority LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

American Institute of CPAs:

American Institute of CPAs National professional organization Established the following: LO 6 Committee on Accounting Procedures Accounting Principles Board 1939 to 1959 Issued 51 Accounting Research Bulletins (ARBs) Problem-by-problem approach failed 1959 to 1973 Issued 31 Accounting Principle Board Opinions (APBOs) Wheat Committee recommendations adopted in 1973 http://www.aicpa.org/

Financial Accounting Standards Board:

Financial Accounting Standards Board Wheat Committee’s recommendations resulted in the creation of a the Financial Accounting Standards Board in 1973. Financial Accounting Foundation Selects members of the FASB Funds their activities Exercises general oversight. Financial Accounting Standards Board Financial Accounting Standards Advisory Council Mission to establish and improve standards of financial accounting and reporting. Consult on major policy issues. LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

Financial Accounting Standards Board:

Missions is to establish and improve standards of financial accounting and reporting. Differences between FASB and APB include: Financial Accounting Standards Board Smaller Membership Full-time, Remunerated Membership Greater Autonomy Increased Independence Broader Representation http://www.fasb.org/ LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

Financial Accounting Standards Board:

The first step taken in the establishment of a typical FASB statement is a. The board conducts research and analysis and a discussion memorandum is issued. b. A public hearing on the proposed standard is held. c. The board evaluates the research and public response and issues an exposure draft. d. Topics are identified and placed on the board’s agenda. Financial Accounting Standards Board Review LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

Due Process:

FASB relies on two basic premises: Responsive to entire economic community Operate in full view of the public Due Process Step 1 = Topic placed on agenda Step 2 = Research conducted and Discussion Memorandum issued. Step 3 = Public hearing Step 4 = Board evaluates research, public response and issues Exposure Draft Step 5 = Board evaluates responses and issues final Statement of Financial Accounting Standard LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

Types of Pronouncements:

Issued by the FASB: Types of Pronouncements Standards, Interpretations, and Staff Positions. Financial Accounting Concepts Emerging Issues Task Force Statements LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.

Governmental Accounting Standards Board:

Governmental Accounting Standards Board Created in 1984 to address state and local governmental reporting issues. LO 6 Financial Accounting Foundation Financial Accounting Standards Board Financial Accounting Standards Advisory Council Governmental Accounting Standards Board Governmental Accounting Standards Advisory Council http://www.gasb.org/

Generally Accepted Accounting Principles:

Generally Accepted Accounting Principles Those principles that have substantial authoritative support . Major sources of GAAP are: FASB Standards, Interpretations, and Staff Positions APB Opinions AICPA Accounting Research Bulletins LO 7 Explain the meaning of generally accepted accounting principles.

Slide 23:

FASB Statements, Interpretations, and Staff Positions APB Opinions CAP Accounting Research Bulletins Category A (Most Authoritative) FASB Technical Bulletins AICPA Industry Audit and Accounting Guides AICPA Statements of Position Category B FASB Emerging Issues Task Force AICPA AcSEC Practice Bulletins Category C AICPA Accounting Interpretations Category D (Least Authoritative) FASB Implementation Guides Recognized Industry Practices House of GAAP LO 7

Generally Accepted Accounting Principles:

Which of the following accounting pronouncements is the most authoritative? a. FASB Statement of Financial Accounting Concepts. b. FASB Technical Bulletins. c. AICPA Accounting Principles Board Opinion. d. AICPA Statement of Position. Generally Accepted Accounting Principles LO 7 Explain the meaning of generally accepted accounting principles. Review

Issues in Financial Reporting:

Issues in Financial Reporting Standard Setting in a Political Environment Accounting standards are as much a product of political action as they are of careful logic or empirical findings. LO 8 Describe the impact of user groups on the standard-setting process.

Slide 26:

FASB Preparers (e.g., FEI) Financial Community Government (SEC, IRS, other agencies) Industry Associations Business Entities CPAs and Accounting Firms AICPA (AcSEC) Academicians Investing Public Accounting standards, interpretations, and bulletins Standard Setting LO 8 Describe the impact of user groups on the standard-setting process. Illustration 1-5 User Groups that Influence Accounting Standards

Issues in Financial Reporting:

All those who serve on the FASB must be Certified Public Accountants. Review: Issues in Financial Reporting LO 8 Describe the impact of user groups on the standard-setting process. False

Issues in Financial Reporting:

Issues in Financial Reporting Expectation Gap What the public thinks accountants should do vs. what accountants think they can do. Difficult to close Sarbanes-Oxley Act (2002) Public Company Accounting Oversight Board (PCAOB) LO 8 Describe the impact of user groups on the standard-setting process.

Issues in Financial Reporting:

Issues in Financial Reporting International Accounting Standards Two sets of standards accepted for international use: U.S. GAAP, issued by the FASB International Financial Reporting Standards (IFRS), issued by the IASB FASB and IASB recognize that global markets will best be served if only one set of GAAP is used. LO 8 Describe the impact of user groups on the standard-setting process.

Issues in Financial Reporting:

Issues in Financial Reporting Ethics in the Environment of Financial Accounting In accounting, we frequently encounter ethical dilemmas. GAAP does not always provide an answer Doing the right thing is not always easy or obvious LO 9 Understand issues related to ethics and financial accounting.

Copyright:

Copyright Copyright © 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

authorStream Live Help