...Conduct, as amended May 1973 and May 1979). FASB Accounting Standards Codification (Accounting Standards Codification) which represents the source of authoritative standards of accounting and reporting, other than those issued by the SEC, recognized by the FASB to be applied by nongovernmental entities. Some of those standards are; ASC 830-230-55-1 - Statement of Cash Flows for Manufacturing Entity with Foreign Operations, ASC 926-330-35-1 - Products Held for Sale, ASC 954-440-25-2 - Continuing Care Retirement Community, ASC 505-20-50-1 – Equity, Stock Dividends and Stock Split and Disclosure, ASC 710-10-05-6 - Compensated Absences. FASB Accounting Standards Codification (Accounting Standards Codification) which represents the source of authoritative standards of accounting and reporting, other than those issued by the SEC, recognized by the FASB to be applied by nongovernmental entities. According with (Becker, 2015) the codification is divided by Areas, Topics, Subtopics, sections, and related tables of contents. Examples of the standards are; ASC 830-230-55-1 - Statement of Cash Flows for Manufacturing Entity with Foreign Operations, ASC 926-330-35-1 - Products Held for...
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...the accounting treatment for new income tax? What is the accounting treatment for training employees? 4. Does Energy have obligations to install smoke filters this year? What is the accounting treatment for installing smoke filters in Energy’s factories next year? SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS 1. Energy should recognize and accrue the liability of clean up lands in this year. Energy should charge clean up costs to expenses. 2. Energy has no obligations to undertake the soil remediation in Dirty country. 3. Energy should recognize the retraining costs to compensation expenses. 4. Energy should recognize install smoke filters to expense. AUTHORITATIVE AND INTERPRETIVE GUIDANCE CONSIDERED Refer to ASC 410-20-25-1 (Background for...
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...accounts receivables. Three of the company’s cash flow transactions are insurance settlement proceeds, sale of accounts receivable, and acquisition of property, plant, and equipment on account. This memo will analyze each transaction under Financial Account Standards Board’s (FASB) Accounting Standards Codification (ASC) 230, Statement of Cash Flows. This memo will also appropriately classify each transaction and discuss any timing issues related to the Statement of Cash Flows. Insurance Settlement Proceeds Issue What is the proper classification for the statement of cash flows related to insurance proceeds? Analysis A tornado destroyed one of the company’s manufacturing facilities, in turn; Go With the Flow received a $20 million settlement from an insurance carrier in the current year. The company decided not to rebuild the facility, instead, they will use the insurance proceeds to fund a defined-benefit pension plan. According to ASC 230-10-45-12, directly related insurance proceeds on a damaged or destroyed building is an investing activity for the statement of cash flows. These insurance proceeds are not financing activities because according to ASC 230-10-45-14, financing activities come from debt instruments such as notes and bonds, or long and short-term borrowing. Insurance proceeds are the result of a settlement, not issuing debt or borrowing. The...
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...order for the FASB to simplify standards, the Accounting Standards Codifications was established. The FASB ASC is designed to simplify user access to GAAP. Due to the access granted to the FASB, the FASB ASC has a complete source on GAAP. The ASC makes an effort to provide users with updated GAAP information, in an easy to access location. The FASB ASC is able to improve accuracy with accounting practices through the simplified and updated research system. One way that the ASC simplified GAAP, by created nine sections in the ASC. The nine sections include general principles, presentation, assets, liabilities, equity, revenue, expenses, broad transactions, and industry. Each section gives the user guidance on the related field of accounting. Such that the general principles section is considered to be an overview on GAAP and the presentation sections covers the financial statement presentation guidelines. Accounting can be considered living as it continually is evolving with society and the rules and regulations are updated consistently. From the constant feed of change from accounting standards, the FASB ASC was created as a way to organize and simplify user access to the GAAP. By doing this, users are able to stay up-to-date with new regulations, and increase accuracy when referring to certain parts of GAAP through utilizing the ASC’s nine content areas. The FASB ASC has created a solution to regulating accounting and providing a simplified codification of GAAP. References ...
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...RESEARCH: Accounting Standard Codification (ASC) 1. FASB had four primary goals in developing the codification. List these four goals: 1. Reduce the amount of time and effort required to solve an accounting research issue 2. Mitigate the risk of noncompliance through improved usability of the literature 3. Provide accurate information with real-time updates as Accounting Standards Updates are released 4. Assist the FASB with the research and convergence efforts. 2. List three SEC authoritative guidance, standard and interpretations included in the codification: 1. Regulation S-X - The Sarbanes-Oxley Act 2002 2. Staff Accounting Bulletins (SAB) 3. EITF Topic - Emerging Issues Task Force 3. The accounting literature replaced by the FASB Codification includes (list five): 1. Improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability, and on the qualities of comparability and consistency. 2. Keep standards current to reflect changes in methods of doing business and in the economy. 3. Consider promptly any significant areas of deficiency in financial reporting that might be improved through standard setting. 4. Promote international convergence of accounting standards concurrent with improving the quality of financial reporting. 5. Improve common understanding of the nature and purposes...
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...Capital Leases | Overview According to FASB ASC 840 (n.d.) (IAS 17), a capital lease exists if one of four conditions is met: the transfer of title of the asset to the lessee, the lease includes a bargain purchase option, the lease period is equal to or greater than 75% of the estimated economic life of the asset, or the present value of the minimum lease payments is 90% or more of the fair value of the asset less investment tax credit held by the lessor. Capital Leases | Requirements of the Lessee The lessee should report the asset and liability on the balance sheet or in footnotes at the present value of the minimum lease payments at the beginning of the lease unless the fair value of the leased asset at lease inception is lower (FASB ASC 840, n.d.). Disclosure requirements in the balance sheet or footnotes include the gross amount of assets recorded under capital leases, future minimum lease payments, and total of minimum sublease rentals (FASB ASC 840, n.d.). The income statement presentation must include the total contingent rentals (FASB ASC 840, n.d.). Capital Leases | Requirements of the Lessor Lease agreements, in general, require systematic payments from the lessee to the lessor. Depending on the recognition of the lessor’s income, historically in relation to lease agreements, the lessor had an option to either follow the accounting matching principle and pair lease payments with the applicable operating cost in any given period or chose...
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...Codification (ASC) 1. FASB had four primary goals in developing the codification. List these four goals: 1. Simplify user access to all authoritative U.S. GAAP by putting them all in one place with codification 2. Assist FASB with the research and international convergence efforts required during the standard-setting process 3. Become the authoritative source of literature for the completed extensible business reporting language (XBRL) taxonomy 4. Clarify that only guidance contained in the Codification is authoritative and other sources are not authoritative 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): ASC 805 FAS 52: ASC 830 FAS 13: ASC 840 FAS 133: ASC 815 FAS 115: ASC 320 5. Explain the following ASC references: FASB ASC 310-10-05-2: 310 Receivables 10 Overall 05 Overview and Background ...
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...operating leases. The international accounting standards board (IASB) and FASB are proposing a draft for lease accounting. The critics are disputing some of the concerns with operating lease financial reporting. This memo will address the proposal changes for operating leases. Also included is a lease type recommendation for the client. According to FASB ASC 840-30-05-4 (2009), lease capitalization includes direct financing and sales-type leases. These types of leases are recognizable by meeting one of the four criteria’s. A lessee under the capital lease method recognizes the lease according to FASB ASC 840-30-25-1 (2009), as an asset and as a commitment. The lessee accounts for the lease commitment in accordance to FASB ASC 840-30-30-1 (2009), at inception when the amount is equal to the present value (PV). In addition, the lease term will exclude the payment portion that represents specific cost such as insurance, maintenance, and taxes. For capital leases, a lessee recognizes lease assets and liabilities on the balance sheet (FASB, 2013). The lessee will determine the amount to record in accordance with FASB ASC 840-30-55-6 (2009), the minimum rental payments over the lease term is the number of months of the lease times the amount of the rental fee. The lessee residual amount is added to the minimum rental expense to get the minimum lease payment. Direct Financing Lease The direct financing leases must meet one of the four criteria’s...
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...company’s assets (FASB ASC 350-20-20). This account is shown on the balance sheet of the acquiring company. The excess of purchase price less the book value of the company represents goodwill. The purchase price is also known as the fair value. In other terms, book value is also known as carrying value, which is the book value minus any accumulated impairment amounts. If the acquiring company pays more than the carrying value, there is a premium. Premium is defined as the additional amount that is paid in excess of the ordinary price, similar to the idea of a premium bond. In order to provide consistent and comparable information about goodwill, the Financial Accounting Standards Board (FASB) has established Generally Accepted Accounting Standards (GAAP) that are used to measure and valuate the impairment of goodwill for companies operating their businesses in the US. Also the International Accounting Standards Board (ISAB) has established international standards known as IFRS. Both the FASB and the ISAB have created accounting standards to help companies determine the valuation and impairment of goodwill. Goodwill is classified as an asset, specifically in the intangibles section on the balance sheet. Intangible assets are assets that have no physical presence and cannot be touched. Goodwill is acquired through business combinations. Under GAAP standards, in a business combination, the acquiring company recognizes goodwill at the date of acquisition (FASB ASC 350-30-30-1). Generally...
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...Case 10-10: An offer You Can’t Refuse I. Overview of case facts: * Fast Eddie is a government contractor of refrigeration systems. * It is being investigated by a governmental for overpricing on sales from 2003 to 2005 and allegations of misrepresentation by its former officer, Sweet Lou. * The criminal and civil investigation began in late 2005. * The government obtains a subpoena for all of Fast Eddie’s corporate record related to the case. * The company’s auditor issued a standard unqualified opinion on Fast Eddie’s 2006 Financial Statements with no liability accrued. * In 2006, the company immediately began an internal investigation. * Fast Eddie dismissed Sweet Lou because of his allegations of defective pricing. * As of March 31, 2007, the government had not filed any charges or specified a monetary penalty against Fast Eddie. * In April 2007, Fast Eddie documented an offer to settle the government’s investigation for $3.7 million (100% of the pretax profits + penalties). * The settlement offer is the best choice for both the company and the government: 1. Even though the sales forms had been completed incorrectly, the government was not overcharged for any equipment or services. 2. The government would probably not win any money if goes to trial. 3. FE’s defense includes the company’s inability to provide accurate pricing data because of the confusing nature of the forms and the technical requirements related...
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... Fall 2014 Acc 310 Codification Exercise As we have discussed, the Accounting Standards Codification (ASC) is a relatively recent addition to an accounting professional’s toolkit. You will access and employ this platform as a normal part of your studies and in the profession in the days ahead. This assignment is intended to help you to become familiar with this important new platform and to enable you to become better aware of the recent “Revenue Recognition” standard that was discussed briefly earlier in the semester. As a professional on the job, your firm will pay big $$$ for a subscription to the Professional View. Rider has paid for your ability as student to use the information below to access the Codification website: http://aaahq.org/ascLogin.cfm Use the following user name and password: User ID AAA51248 Password s33UYhH This assignment is designed to provide you with a baseline familiarity with the ASC and the terminology associated with the new Revenue Recognition pronouncement. Required: 1. Access the ASC with the user name/password information above and click on the “Help” link for the site. Explore the suggested strategies that may be employed for “searching” ASC content. Describe more specifically how information in the ASC may be identified and retrieved through the use of “Codification Reference” terminology. Starting with the term “Topic,” identify as well the categories...
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...Pharma Co Date: June 18, 2016 Prepared by: John B. Owens Viewed by: Joseph Walsh Issue: Determine proper accounting treatment for restructuring program costs under GAAP for the year ended December 31, 201X. Background: Pharma is in the process of restructuring a business line. As part of a restructuring, the Pharma is considering the relocation of a manufacturing operation from its present location to a new facility in a different geographic area. The relocation plan would include terminating certain employees (research and development employees). On December 15, 201X, Pharma issued a press release announcing its intentions to terminate the lease of the old facility. On December 27, 201X, Pharma management communicated the main features of a one-time, non-voluntary termination plan to its employees. Pharma will incur a relocation cost of $500,000 and staff training cost of $1.5 million. Further, the Company has entered into irrevocable contracts with certain other relevant parties to affect the restructuring plan over the following 18 months. The cost to dismantle the existing manufacturing operation is estimated to be $1 million. In the jurisdiction in which Pharma operates its current facility, there is no legal obligation for dismantling plants when abandoned. Pharma has not historically dismantled its plants when abandoned but decided to make an exception. In a press release, the Company has stated its intention to dismantle the existing operation. The...
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...Chapter 6 Property and Equipment and Other Assets Overview 6.01 Health care entities use various kinds of property and equipment. Those assets are generally significant to the financial position of institutional health care entities, such as hospitals and nursing homes. Typical accounts used to record property and equipment transactions are land, land improvements, buildings and improvements, leasehold improvements, equipment (fixed and movable), leased property and equipment, accumulated depreciation and amortization, and construction in progress. Health care entities also have intangible assets, which may be acquired in connection with business combinations or purchases, or developed from other resources of the entity. Intangibles with finite lives are amortized according to their useful life. Examples of intangibles include: Health Plans customer relationships, such as employer groups or members provider networks trademarks trade names software licenses favorable leases non-compete agreements goodwill Hospitals and other health care facilities licenses certificates of need managed care contracts goodwill Physician practices medical charts non-compete agreements managed care contracts goodwill 6.02 6.03 Supplies inventories are generally not very significant to the financial position of health care entities. However, because of the volume and cost of supplies used, they may be much more significant to operating expenses and the statement of operations. Supplies typically...
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...Devry College of NY | Masters of the Universe | Accounting Project Case 11-3 | 12/7/2011 | | Introduction Mergers and Acquisitions are a normal part of the Corporate Finance world. Every week we hear news about large and small corporate mergers and buy-outs. They bring separate companies under the umbrella of a larger company that can be more efficient, created more profits and often offer more products, services and better quality. In this project we look at a joint venture type of merger that brings two companies together in order to form a third company and compete in new market segment. Saturn Inc. and Venus Inc. are two unrelated companies that have decided to form a Joint Venture to form a third company that will be called Jupiter Inc. The new company will be owned 51 percent by Saturn and 49 percent by Venus. At the forming of the Jupiter Inc., Saturn contributed $561 million and Venus contributed four manufacturing facilities and assembled the workforce. Venus’ contribution came with a fair value of $539 Million. Venus was already in the clothing manufacturing business and was looking for an exit strategy because it no longer seemed like a good fit for Venus Inc. Saturn Inc. wanted to expand its manufacturing of children’s clothing. The newly formed company, Jupiter Inc. would satisfy both of the needs by entering into a relatively new industry in making and selling organic clothing to be sold to unrelated retailers. Saturn and Venus...
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...Case Analysis- Inventory or Property Plant and Equipment Overview and Introduction Red Hen Company, which operates for producing and processing and selling fresh eggs. After its first year, it began to prepare financial statements. However, the accountancy found it’s hard to identify these egg-producing flocks as inventory or as property, plant and equipment. This essay will cite accounting standards and rules from FASB, identifying the definitions related to inventory and fixed asset, and discuss the related details in company’s specific situation. Finally, the essay will provide recommendations on how to present the hens in the financial statement, and draw a conclusion based on the previous recommendations. Identification Based on Accounting Principles and Specific Situation When preparing financial statements at the end of its first operating years, Red Hen Company has to identify the classification of its egg-laying flocks. Whether the items should appear in the inventory section under the current asset, or be treated as fixed asset? Admittedly, the egg-laying flocks can be identified as fixed asset (Property, plant, and equipment), which used to create and distribute an entity’s products and services [FASB ASC 360-10-05]. Specifically, egg-laying flocks could be treated as equipment. [FASB ASC 905-360-25-4] points out “except for animals with short productive lives classified as inventory, breeding animals, livestock (which includes cattle, hogs, sheep, and goats)...
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