...legal authority to enforce compliance with financial reporting standards. Difference Between GAAP & IFRS GAAP (FASB) | IFRS (IASB) | Under U.S GAAP firms can choose to report comprehensive income in the statement of shareholder’s equity. | Under IFRS the income statement can be combined with “other comprehensive income” & presented as a single statement of comprehensive income. Alternatively presented separately. | CHAP – 24 GAAP (FASB) | IFRS (IASB) | FASB framework includes revenue, expenses, gains, losses and comprehensive income. | IASB framework lists income and expenses as elements related to performance. | FASB defines an asset as a future economic benefit. It also uses word probable in its definition of assets and liabilities. | IASB defines it as a resource from economic benefit is expected to flow. | FASB does not allow the upward valuation of most assets. | ------------- | U.S GAAP has traditionally been more rules-based, but the common conceptual framework is moving towards an objective-oriented approach. | IFRS is largely a principles-based approach. | Companies must disclose their accounting policies and estimates in the footnotes and Management’s Discussion Analysis. | Companies must disclose their accounting policies and estimates in the footnotes and Management’s Discussion Analysis. | CHAP – 25 GAAP (FASB) | IFRS (IASB) | When the outcome of a long term contract can b reliably estimated, percentage-of –completion method is...
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...Final Exam Review- Hitzig parts 1-3 1. Revenue Recognition: General: 25-1 The recognition of revenue and gains of an entity during a period involves consideration of the following two factors, with sometimes one and sometimes the other being the more important consideration: ← a. Being realized or realizable. Revenue and gains generally are not recognized until realized or realizable. Paragraph 83(a) of FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises , states that revenue and gains are realized when products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash. That paragraph states that revenue and gains are realizable when related assets received or held are readily convertible to known amounts of cash or claims to cash. ← b. Being earned. Paragraph 83(b) of FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises , states that revenue is not recognized until earned. That paragraph states that an entity's revenue-earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations, and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. That paragraph states that gains commonly result from transactions and other events...
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...John Mullin Audit Case 5.3 North face Inc. 10/10/12 North Face Inc. 1. As an auditor, your job is to examine companies’ financial statements and make sure the information correctly reflects the economic events that occurred during the accounting period. When a mistake is found the auditor determines if the misstatement is material or immaterial. Misstatements are material when they affect a person’s decision using the financial statements and are immaterial if there is no effect on a person’s decision. When an auditor comes across a misstatement of the financial statements that is considered immaterial, they should recognize it and suggest that management fix it. Since it is immaterial, the auditor shouldn’t insist if management decides not to take the auditors suggestion because after all it is immaterial and will not affect anyone’s decision based on the financial statements. 2. With unethical people out there in the world, like in this case Crawford, auditors should try not to let their clients be aware of the materiality thresholds that are set and used for the audit. If management or other employees find out this information, they can use it to manipulate the records, accounts, or the system since they have an idea of what is being looked for. Now, is it feasible for an auditor to conceal this information? I believe it is almost impossible for this information to be held from the client. During an audit, often times the auditors will get assistances...
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...uncollectible amounts or other valuation account, if any, while the former is not. 310-10-35 Credit losses for loans and trade receivables, which may be for all or part of a particular loan or trade receivable, shall be deducted from the allowance. The related loan or trade receivable balance shall be charged off in the period in which the loans or trade receivables are deemed uncollectible. Recoveries of loans and trade receivables previously charged off shall be recorded when received. B. FASB: 845-10-05 In a barter transaction involving barter credits, an entity enters into a transaction to exchange a nonmonetary asset (for example, inventory) for barter credits. Those transactions may occur directly between principals to the transaction or include a third party whose business is to facilitate those types of exchanges (for example, a barter entity). The barter credits can be used to purchase goods or services, such as advertising time, from either the barter entity or members of its barter exchange...
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...|Topic in Mastery of the |Chapter 3 - Building Your |Chapter 4 – Brain Teasers: Using|Chapter 5 – Cases to Accompany | |Financial Accounting Research |Business Vocabulary: Defining |FARS to Untangle the Mystery |FARS [Related Assignments at End| |System (FARS) Through Cases 2nd |Terms and Solving Problems |[See Introduction and Example |of Cases] | |Edition by Wallace [Chapter 1 |Through FARS [See Introduction |pp. 4-1 to 4-7] | | |and 2 where noted] |and Example pp. 3-1 to 3-7] | | | |FASB, Standard Setting; GAAP; |Table 3.1 Accounting Standards; |1: How Many Standards Have Been |Case 12: Emerging Issues: The | |Governance; FARS [Chapter 1 – |Table 3.39 Regulated Industry; |Issued by FASB?; 2: Dissents |Agenda of FASB; [Case 8 Related:| |The Financial Accounting |Table 3.40 Specialized Industry |Portending Future?; 32: What |Does It Matter Where Guidance Is| |Research System (FARS) Primer.] |Considerations |Makes One GAAP Preferable to |Located?]; [Case 12 Related: Are| | | |Another?; 30: When Can Analogies|Accounting Rules to Blame?] | | | |Be Used?; 31: What Are the 10 | | | ...
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...other parts of the world in the last few years. -Shrikant Sortur The author is a member of the Institute as well as AICPA, working with Lason Systems Inc, MI, USA. He can be reached at shrikant_ sortur@yahoo.com Revenue Recognition Under US GAAP It is estimated that Revenue Recognition related aspects appear in close to two hundred different pieces of accounting literature; of course these pieces of literature include many nuances, some of which are unique to particular transactions. Since no comprehensive standard on revenue recognition exists, there is a significant gap between the broad conceptual guidance in the Financial International Accounting Standards (IAS) are drafted on a ‘Principles-based’ approach. The same is the case with Indian Accounting Standards, which adopts the IAS framework. The United States Generally Accepted Accounting Principles (US GAAP) are more along the lines of a ‘Rules-based’ framework. The more complex the business, the more specialised the industry, the more difficult the decision becomes for that business as to when to recognise earnings. This article attempts to...
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...have immaterial effect on the financial statements. The auditor can give their clients suggestions on where to make adjustments. If the client insists that doesn’t want to make any changes, then the auditor should exercise professional skepticism, when considering the possibility that a material misstatement due to fraud could be present (AU Section 316). 2. The auditor should design and perform audit procedures in a manner that addresses the assessed risks of material misstatement for each relevant assertion of each significant account and disclosure. In our case, auditors should not be aware of the materiality threshold. Also, the auditor should not reveal the materiality levels to their clients. For the second part of the question, it is not feasible as this information cannot be held away from the clients. Deloitte might have increased the substantive testing given Crawford’s barter transactions. 3. The FASB Concepts Statement No. 5 “Recognition Measurement in Financial Statements of Business Enterprises” and SFAS No. 48 “Revenue Recognition When Right of Return Exists” are guidelines that dictate when companies are entitled to record revenue. The two customers did not pay for the merchandise as they were made to sign for the merchandise they did not have, which means there was no exchange. Also, the transaction was not finalized until the customer resold the merchandise, which means the sale was not realized. 4.The principal objectives auditors hope to accomplish...
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...Contents 1. INTRODUCTION..................................................................................................................... 2 1.1 Luca Pacioli: Father Of Modern Accounting ...................................................................................... 2 1.2 19th Century – The Beginnings of Modern Accounting in Europe and America ............................... 3 1.3 20th Century – The Development of Modern Accounting Standards................................................. 4 1.4 21st Century – Accounting Regulation in Modern Commerce ........................................................... 4 2. DEVELOPMENT OF ACCOUNTING .................................................................................. 4 3. EVOLUTION OF ACCOUNTING ......................................................................................... 5 4. THE CONSEQUENCE OF DOUBLE ENTRY ..................................................................... 6 5. RECENT GROWTHS AND DEVELOPMENTS IN ACCOUNTING ............................... 7 6. LOOKING TO THE FUTURE ............................................................................................... 8 REFERENCES .............................................................................................................................. 9 1. INTRODUCTION The main objective of this study is to critically review the Origin, Growth and Development of accounting theories and their impacts on financial reporting...
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...The Trueblood Case Studies: Case 04-7 – Lighthouse * Lighthouse is a provider of locating services to the shipping industry. Lighthouse’s Ship Finder service is a one-way messaging service that routes messages from the ships at sea to the shipping company’s offices. These messages provide the shipping company with detailed information related to ship location, speed, and current local weather. In order to utilize the Ship Finder service, Lighthouse must install a dedicated hardware unit or device on the ship. Customers generally sign two separate contracts, one governing the sale of the devices and the other governing the provision of the service. Once the devices are installed (one per ship), Lighthouse will connect the device to its service. Service contracts generally are for 12 months and are billed on a monthly basis. The services are priced at standard rates, although discounts are offered depending on the number of devices sold. The devices also have been sold at a discount. However, the discount is based on the number of units purchased (or to be purchased) and does not appear to be unreasonable. Standard pricing for the devices and service are as follows: Product or Service Price Ship Finder Device $10,000 per unit, MSRP Ship Finder Service $300 per month, per unit The Lighthouse devices are made to be used exclusively with the Lighthouse services and, currently, there are no other competitors making devices that work with the Lighthouse services...
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...Financial Reporting Research In many cases, a business is not successful without a well-organized financial branch of their company. Whether it is a small business and reporting is done by the owner or if it is a large business that has a financial department, a company needs to know if it is making a profit. Modern accounting is believed to have begun around 1494 A.D. Book keeping entered into the Unites States in late 19th century. The first accounting exam was held by and organization in 1896. Today, accounting is used throughout the world and business to communicate, buy, sell and barter with each other very frequently and therefore, International accounting principles have been developed for the entire globe (Csebfalvi, 2012). In today’s highly competitive business world the environment requires companies to create a business strategy that includes accounting. This portion of their business strategy will help them achieve their strategic goals for the organization. In 1973, the International Accounting Standings Committee came in to existence in order to establish new international standards. The International Accounting Standards Board is the committee responsible for developing International Financial Reporting Standards (Knowledge guide to international accounting standards). This firm ensures that businesses are applying these standards to their financial reports. The first recorded account of international accounting was an article by Lord Benson called The...
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...|FRAMEWORK | | |U.S. GAAP |IFRS |Similarities | |Purpose of Framework |The FASB framework resides lower in hierarchy. |Management is explicitly required to |Both the frameworks are similar in | | |Management is not required to prioritize it if no|prioritize the IASB framework if there is |their purpose to assist in developing| | |standard is available. |no standard or interpretation available. |and assisting standards. | |Objectives of |It provides different objectives for business |It gives one objective for different |Both frameworks have a broad focus to| |financial statement |entities versus non business entities. |business entities. |provide relevant information to a | | | | |wide range of users. | |Underlying assumptions|Although it recognizes, but not given much |Give importance to accrual and going | | | |prominence is given to accrual and going concern |concern basis...
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...All CFA Institute members and candidates are required to comply with the Code and Standards Basic structure for enforcing the Code and Standards The CFA Institute Bylaws primary principles Based on two Fair process to member and candidate Confidentiality of proceedings Rules of Procedure Maintains oversight and responsibility The CFA Institute Board of Governors Through the Disciplinary Review Committee (DRC) Is responsible for the enforcement of the Code and Standards Conducts professional conduct inquiries Structure of the CFA Institute Professional Conduct Program Professional Conduct program (PCP) The CFA Designated Officer Selfdisclosure An inquiry can be prompted by several circumstances Directs professional conduct staff Written complaints Evidence of misconduct Report by a CFA exam proctor jim do Interviewing The Professional Conduct staff conducts an investigation that may include cf a. 1. Code Of Ethics And Standards Of Professional Conduct Collecting documents and records in support of its investigation Conclude the inquiry with no disciplinary sanction Issue a cautionary letter If finding that a violation of the Code and Standards occurred, the Designated Officer proposes a disciplinary sanction ay to Process for the enforcement of the Code and Standards When an inquiry is initiated Upon reviewing the material obtained during the investigation, the Designated Officer may .c Requesting a written explanation from the...
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...for US public filings in the foreseeable • In May 2011, the SEC’s Office of future, IFRS has been affecting US the Chief Accountant published a companies for some time, primarily Staff Paper exploring one possible through engaging in cross-border method to incorporate IFRS merger-and-acquisition (M&A) into the US financial reporting activity, meeting the reporting needs system, involving an active of non-US stakeholders, and assisting Financial Accounting Standards with or monitoring of the IFRS Board (FASB) incorporating IFRS requirements of non-US subsidiaries. into US GAAP over an extended US companies are also becoming period of time (the “endorsement” increasingly aware of IFRS, as key method). Under this method, the aspects of US generally accepted FASB would remain the US stanaccounting principles (US GAAP) dard setter and potentially endorse and IFRS continue to be the focus of new IFRS into the US financial ongoing joint projects. reporting system. Additionally, the FASB would also consider existing IFRS has also been a subject of focus IFRS during a multiple-year period, by the Securities and Exchange and consider how to...
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...DISCUSSION OF SAB 101 Q & A Definition of Revenue (FASB Concepts Statement No. 6): Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivery or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations. Separate definition for Gains Guidelines for Revenue Recognition The revenue recognition principle (FASB Concept Stmt. No. 5) provides that companies should recognize revenue 1) when it is realized or realizable and 2) when it is earned. Revenues are realized when goods and services are exchanged for cash or claims to cash (receivables). Revenues are realizable when assets received in exchange are readily convertible to known amounts of cash or claims to cash. Revenues are earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, that is, when the earnings process is complete or virtually complete. Revenue Recognition Issues Usually revenue is recognized at the point of sale because most of the uncertainties related to the earning process are removed and the exchange price is known. But, the earning process itself is not defined precisely anywhere in the authoritative literature. More importantly, an entity's earnings process(es) is (are) determined by its business model(s) and the number of business models can grow...
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...Financial Accounting Standards Board ORIGINAL PRONOUNCEMENTS AS AMENDED Statement of Financial Accounting Standards No. 157 Fair Value Measurements Copyright © 2010 by Financial Accounting Foundation. All rights reserved. Content copyrighted by Financial Accounting Foundation may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Foundation. FAS157 Statement of Financial Accounting Standards No. 157 Fair Value Measurements STATUS Issued: September 2006 Effective Date: For financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years Affects: Amends APB 21, paragraphs 13 and 18 Deletes APB 21, footnote 1 Amends APB 28, paragraph 30 Amends APB 29, paragraphs 18 and 20(a) Deletes APB 29, paragraph 25 and footnote 5 Amends FAS 13, paragraph 5(c) Amends FAS 15, paragraphs 13 and 28 Deletes FAS 15, footnotes 2, 5a, and 6 Amends FAS 19, paragraph 47(l)(i) Amends FAS 35, paragraph 11 and footnote 5 Deletes FAS 35, footnote 4a Amends FAS 60, paragraph 19 Deletes FAS 60, footnote 4a Amends FAS 63, paragraphs 4, 8, and 38 through 40 Amends FAS 65, paragraphs 4, 6, 9, 10, 12, and 29 Amends FAS 67, paragraphs 8 and 28 Deletes FAS 67, footnote 6 Amends FAS 87, paragraphs 49 and 264 and footnote 12 Deletes FAS 87, footnote...
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