...have been followed. 2. A member shall not discriminate in employment of assistants. 3. A member shall not include self-laudatory statements that are not based on verifiable facts in advertisements. 4. A member shall not accept a commission for a referral to a client of products of service of others. 5. A member’s fee may vary depending on the complexity of the service rendered. 6. A member is not precluded from responding to an inquiry by a trial board of the AICPA 7. A member may not serve as a trustee for any pension trust of the client during the period covered by the financial statements. 8. A member shall adequately plan and supervise an engagement. 9. A member may not have or be committed to acquire any direct financial interest in the client. 10. A member shall not practice under a misleading firm name. 11. A member shall not knowingly subordinate his or her judgment to others. 12. A member shall follow the technical standards of the Auditing Standards Board in an audit engagement. 13. A member bases the fee on the findings determined by the IRS in a tax audit case. 14. A member discloses confidential information in a peer review of the firm’s practice. 15. A member issues an unqualified opinion when a client departs from GAAP because of a conceptual disagreement with the FASB. 3-35 – Ethical Issues 1. 2. 3. 4. 5. 4-20 – (Common law- Constructive fraud, negligence...
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...Changes to Accounting Standards for Leases Who is likely to be affected? Businesses which are lessees or lessors of assets and account for lease transactions using a leasing accounting standard which changes on or after 1 January 2011. General description of the measure Current accounting standards are International Accounting Standards (IAS) and UK Generally Accepted Accounting Practice (UK GAAP). Changes to the IAS lease accounting standard are expected during 2011, and changes to UK GAAP might follow in 2013. Legislation will be introduced in Finance Bill 2011 to ensure continuity of tax treatment for lease transactions for businesses which begin to account for the transactions under new accounting standards, expected to be introduced from 2011. The measure will require tax profits and losses to continue to be calculated as if the changes to lease accounting standards had not taken place. Policy objective The measure will ensure that existing tax rules that rely on accounting classifications of leases as operating or finance leases, and the accounting treatment of lease transactions, continue to operate in the way they currently do. The objectives are to: • • ensure that lessors and lessees will be neither disadvantaged nor advantaged by the proposed accounting changes; remove uncertainty for businesses about the future tax treatment of leasing contracts, arising from uncertainty about future lease accounting standards and their interaction with current tax rules;...
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...CHAPTER 1 Financial Accounting and Accounting Standards ASSIGNMENT CLASSIFICATION TABLE Topics 1. 2. 3. Subject matter of accounting. Environment of accounting. Role of principles, objectives, standards, and accounting theory. Historical development of accounting standards. Authoritative pronouncements and standards-setting bodies. Questions 1 2, 3, 4 5, 6, 7, 8 Cases 1 3, 4 2, 4 4. 8, 9, 10, 11, 12 5, 17 5. 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 23, 24, 25, 26, 27 28 29 6, 7, 8, 10, 11, 12, 13, 15, 16 6. 7. 8. Role of pressure groups. International accounting. Ethical issues. 9, 18, 19 15 14 1-1 ASSIGNMENT CHARACTERISTICS TABLE Item C1-1 C1-2 C1-3 C1-4 C1-5 C1-6 C1-7 C1-8 C1-9 C1-10 C1-11 C1-12 C1-13 C1-14 C1-15 C1-16 C1-17 C1-18 C1-19 Description Financial accounting. Objectives of financial reporting. Accounting numbers and the environment. Need for accounting standards. AICPA’s role in standards setting. FASB role in standards setting. Government role in standards setting. Meaning of generally accepted accounting principles. Politicalization of standards setting. Models for setting accounting standards. Standards-setting terminology. Accounting organizations and documents issued. Accounting pronouncements. Issues involving standards setting. Securities and Exchange Commission. Standards-setting process. History of standards-setting organizations. Economic Consequences. Standards-setting process, economic consequences. Level of Difficulty...
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...tasked with establishing and overseeing accounting practices or are “accepted” as a practice by having been time proven and having “universal” application (Kieso, Weygandt, and Warfield (2007). There are four main organizations that are “instrumental in the development of financial standards (GAAP) in the United States.” (Kieso, Weygandt, and Warfield (2007). These are the Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Government Accounting Standards Board. (GASB) (Kieso, Weygandt, and Warfield (2007) The SEC is the sole body for enforcement, with the AICPA and the FASB having been created at the urging of the SEC for a private sector entity to use its resources to establish effective guidelines. The SEC continues to support the formation and improvement of accounting guidelines by the private sector as long as they are “subject to commission oversight” (Kieso, Weygandt, and Warfield (2007). The FASB uses “The Hierarchy of Generally Accepted Accounting Principles,” and they are listed as follows: FASB Standards, Interpretations, Staff Positions, APB (Accounting Principles Board), and AICPA Accounting Research Bulletins (Kieso, Weygandt, and Warfield (2007). In the event of a dispute these are the initial channels the problem will go through to seek resolution. The goal of financial accounting is to provide useful and helpful information to investors, creditors...
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...Explaining Basic Accounting Concepts and Business Structures The Hierarchy of Generally Accepted Accounting Principles identifies the sources for the accounting standards and principles. These sources include “FASB Standards, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins” (Kieso, Weygandt, & Warfield, 2007, p. 12). When companies prepare financial statements in accordance with GAAP, they sometimes run into situations in which some standards do not address a certain situation or two standards may conflict. Because of this the Statement of Accounting Standard Number (SAS) 69 established a hierarchy to follow. The hierarchy forms a kind of order for GAAP rules and procedures used in preparing financial statements. The hierarchy is made up of four categories that have a descending level of authority. For example, “Category A consists of the following principles: FASB Statements of Financial Accounting Standards, FASB Interpretations, APB Opinions, and AICPA Accounting Research Bulletins” (eNotes, 2011, para. 5). Because the categories are in descending order, category A would take precedence over the other three categories. The FASB identified certain qualities of accounting information that make it effective for making decision. For accounting information to be considered effective it should possess these four qualities: relevance, reliability, comparability, and consistency. The information should be relevant enough to...
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...It is easy to understand and all information required to measure it is factual. AACSB: Reflective thinking Bloom's: Knowledge Learning Objective: 01-01 Describe the function and primary focus of financial accounting. Level of Learning: Medium 30. Which of the following groups is not among financial intermediaries? A. Mutual fund managers B. Financial analysts C. CPAs D. Credit rating organizations AACSB: Reflective thinking Bloom's: Knowledge Learning Objective: 01-01 Describe the function and primary focus of financial accounting. Level of Learning: Medium 31. Which of the following was the first private sector entity that set accounting standards in the United States? A. Accounting Principles Board B. Committee on Accounting Procedure C. Financial Accounting Standards Board D. AICPA AACSB: Reflective thinking Bloom's:...
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...The standard setting process The recent, high profile accounting scandals shook the foundations of the capital markets. Financial reporting furnishes investors and other stakeholders with reliable and relevant information. In the short term unethical financial reporting resulted in loss of billion dollars, but in the long term the impact was even more severe: loss of confidence in financial reporting as reliable source of information. The following reforms aimed to restore investor confidence in financial reporting and accounting profession. They reinforced the importance of ethics in financial reporting and provided recommendation on accounting standard setting process. The following paper provides a brief discussion on standard setting organizations and process and the authoritative sources of accounting. This study also covers the objectives of financial reporting and its role in today’s economy and concludes that ethics will remain cornerstone of the accounting profession. Table of Contents Abstract 2 The standard setting process 4 Standard setting process and authoritative sources of accounting information 5 Objectives of financial reporting 6 Ethics’ role in financial reporting 6 Conclusion 7 References 10 The standard setting process The dawn of the new century brought an economic downturn. The tragic events of 9/11 and the burst of the dot.com bubble accelerated the general decline. Investors kept corporate managements under constant pressure...
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...ACCT 495 Section 2: CASE STUDIES IN ACCOUNTING Research Assignment One Erin M. Bordwell September 29, 2012 Dr. Hossain Fall Quarter 2012 CALIFORNIA STATE UNIVERSITY, LOS ANGELES ACCT 495: Bordwell RESEARCH: Accounting Standard Codification (ASC) 1. FASB had four primary goals in developing the codification. List these four goals: 1) Simplify user access by codifying all authoritative U.S. GAAP 2) Ensure that the codification content accurately represented authoritative US GAAP 3) Mitigate the risk of noncompliance with standards through improved usability of the literature 4) Provide codification research system that is accurate with real-time updates as new standards are released 2. List three SEC authoritative guidance, standard and interpretations included in the codification: 1) Regulation S-X (SX) 2) Financial Reporting Releases (FRR)/Accounting Series Releases (ASR) 3) Interpretive Releases (IR) 3. The accounting literature replaced by the FASB Codification includes (list five): 1) Accounting Research Bulletins (ARB) 2) Accounting Principles Board Opinions (APB) 3) AICPA Accounting Interpretations (AIN) 4) Statements of Financial Accounting Standards (SFAS) 5) FASB Interpretations (FIN) 4. For the following five FASB standards (FAS), provide the corresponding ASC Topic#: FAS 141(R): FAS 52: FAS 13: FAS 133: FAS 115: ! ASC 805 ASC 830 ASC 840 ASC 815 ASC 320 1 ACCT 495: Bordwell 5. Explain the following ASC references: FASB ASC 310-10-05-2: The Overall...
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...The Financial Accounting Standards Board Accounting Standards Codification (also known as “the Codification”) was created by the Financial Accounting Standards Board (FASB) to provide users of U.S. generally accepted accounting principles (GAAP) one place to access authoritative literature on GAAP. The FASB also developed the Financial Accounting Standards Board Codification Research System (CRS). “CRS is an online real-time database that provides easy access to the Codification. The Codification and the related CRS provide a topically organized structure, subdivided into topic, subtopics, sections, and paragraphs, using a numerical index system.” (Kieso, Weygandt, & Warfield, 2010, p 14) CRS can be used to research GAAP information such as accounting policies, comprehensive income, net income, other comprehensive income, and reclassification adjustments. Definitions of accounting policies can be found in two ways on CRS website, asc.fasb.org/home. Definitions can be found in the Master Glossary. The link to the Master Glossary is the last entry in the far left column. Definitions can also be found in the Glossary link under each specific topic. For example, comprehensive income is defined as: The change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. CRS...
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...International Accounting Standard Board (IASB or collectively the boards) and the Financial Accounting Standards Board of US (FASB or collectively the boards) have been working together on a project to revise and converge IFRS and US GAAP on revenue. Consequently, the Boards have jointly issued two exposure drafts outlining proposed changes. The latest one was published in November 2011 with public comments received in March 2012. If adopted, it will substitute all revenue standards prescribed by IFRS including IAS 11 Construction Contracts and IAS 18 Revenue and relevant interpretations and most of the revenue recognition requirements and related guidance in US GAAP. This paper, first of all, will provide a brief background of the joint project. Then it will highlight proposed changes and its implications in key areas. Finally, it will discuss effective date, early adoption and transition of the new standards and offer some alternative view. Background While the definition of revenue in IFRS seems clear, revenue requirements in IAS 11 and IAS 18 actually could be problematic to be applied to complicated transactions. Additionally, some application guidance on critical issues such as revenue for multiple element agreements is quite limited. Therefore a number of entities have established their IFRS accounting guidelines by resorting to parts of US GAAP. However, US GAAP consists of broad concepts and many requirements issued by multiple standard setters, thus resulting...
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...CONSERVATIVE RECOGNITION OR COOKIE JAR RESERVES Robin Turner Summary Two months after graduating from college Nick O'Brien started to work in the accounting department at his aunt's software company. While going over some financial statements Nick notices what he believes are revenue recognition issues. Since Nick believes that Lee Marchetti the Chief Financial Officer (CFO) of O'Brien Software is an honest man, he decides to have a discussion with him about what he believes are revenue recognition issues. Mr. Marchetti explains to Nick that accounting is not an exact science and that it involves a lot of judgment calls and that O'Brien Software's "deferrals and estimates are well documented and in accordance with the Securities and Exchange Commission (SEC) rules" (Conservative Recognition or Cookie Jar Reserves, Carpenter p. 3). After speaking with Mr. Marchetti, Nick decided to still speak with his aunt Amelia about his concerns. Amelia expressed to Nick that she was not very good when it came to accounting matters but she was educated when it came to recognizing revenue and that she believed being conservative was better than overstating. However, she asked Nick if he thought she should mention what he found to the audit committee. Issues/Questions One question that should be addressed surrounds why the CEO Amelia is not aware of certain financial aspects of her business. The Sarbanes-Oxley Act requires the chief executive officer (CEO) and the chief financial...
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...Phoenix Syllabus, 2011). Basic accounting concepts In successfully running and operating a business, business structure and basic accounting concepts must be present to operate well. The generally accepted accounting principles also known as the (GAAP) set standards to the financial statements. The standards set by the GAAP must also include effective accounting information. Companies do have the option either to use accrual basis of accounting or cash basis of accounting. However, under the GAAP it does accept cash basis accounting. Companies will determine the type of business to do business in. However, these decisions do makes the difference in how successful a company is. [pic]GAAP The GAAP are standards, which are universally practiced and generally accepted in accounting. These standards and rules are for accountants to use in compiling financial statements and ensure consistency within organizations. The government entities, which are responsible for the establishment of the GAAP, are: the Securities and Exchange Commission also known as the (SEC), the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB)....
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...countries. Chevron is one of the world’s six ‘super major’ oil companies. For the past five years, Chevron has been continuously ranked as one of America’s five largest corporations. Chevron’s headquarters is in San Ramon, California (Fox, 2012). It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. Chevron was originally known as Pacific Coast Oil Company in 1979, where they made their oil discovery in Pico Canyon north of Los Angeles, California (2012). Since its origination, it has blossomed and generated large amounts of revenue ever since. The International Financial Reporting Standards would be beneficial for Chevron. However, since this company has been in existence for a decade and have foundational methods and ways of their accounting and financial systems such as GAAP already implemented, it is hard for Chevron to adjust and...
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...which appears on company’s financial statement all the time, no matter fortune 500 companies or startup firms. Most of the companies will rent tangible property including office and machines that is called rental agreement. When it comes to accounting, leasing becomes one of the most important sources of the financial statement. Since 1977, Financial Accounting Standards Board (FASB) set accounting standards to regulate leases that show on financial statement. However, current accounting rules for leases unable to meet the needs of users of financial statements because they do not provide a truthful representation of leasing transaction (Financial Accounting Standards Board). As a result, Financial Accounting Standards Board (FASB) and International Financial Reporting Standards (IFRS) decided to create joint project to redefine the accounting rules for leases (IFRS 1). Therefore, the draft of new accounting standard were made in 2010 and expected to be applied in 2013. The FASB and IFRS have proposed various changes, which should be implemented within leasing accounting. In accordance to resolutions made by the boards, executor costs, for example, property taxes, maintenance charges within the common area as well as operating expenses will no longer be included within the asset right-of-use. Deductions of these amounts can be done on...
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...CHAPTER 1 Governmental and Nonprofit Accounting: ENVIRONMENT AND CHARACTERISTICS ANSWERS TO QUESTIONS QUESTION 1-1 a. The similarities of accounting for profit-seeking and G&NP organizations include: 1. Double-entry system of accounts. 2. Most accounting mechanics, e.g., basic transaction documents, journals, ledgers, charts of accounts. 3. Where a G&NP organization has a business-type activity, e.g., a municipal electric utility, the accounting largely parallels that for a similar private business (e.g., electric utility). b. Among the unique aspects of G&NP organization accounting are: 1. Fund accounting—designed to separate resources according to the purposes for which they may be used and to account for their uses and balances. 2. Budgetary control techniques—to help assure appropriations are not overexpended and all resources due the G&NP organization are received by it. Question 1-2 a. A fund of a government organization is an independent fiscal and accounting entity. Each fund has a separate self-balancing set of accounts in which are recorded the resources segregated for specific purposes, the related liabilities and residual equity (fund balance or net assets), and the changes therein. Financial statements typically must be presented to report the financial position and operating activities of a fund of a government. b. As the term is generally used in commercial accounting, a "fund" merely indicates that a portion...
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