...convergence projects designed to improve both US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS), eliminate differences between them, and ultimately make the standards fully compatible. In 2010, to increase efficiency the boards decided to focus on the priority projects. Two of those projects, fair value measurement and statement of other comprehensive income, are poised for release. Now, the “big three” remain—financial instruments, revenue recognition, and leases. The IASB is also working to its monster project on insurance contracts, with the FASB closely engaged in the discussion. Therefore, bellow is the list of the active joint FASB/IASB projects according to current technical plan on the fasb.org website: - Accounting for Financial Instruments (Updated November 10, 2011): • Classification and Measurement (Updated November 10, 2011); • Impairment (Updated November10, 2011); • Hedging (Updated November 10, 2011). - Revenue Recognition (Exposure Draft issued November 14, 2011); - Leases (Updated November 15, 2011); - Balance Sheet – Offsetting (Updated August 15, 2011); - Consolidation: Policy and Procedures (Exposure Draft issued November 3, 2011 and updated November 23, 2011; - Investment Companies (Exposure Draft issued October 21, 2011 and updated November 20, 2011); - Insurance Contracts (Updated November 22, 2011). Also, a list of active and inactive joint FASB/IASB projects is presented in Appendix A. ...
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...Advanced Auditing 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an “immaterial” effect on the given financial statements? No, if we consider overall accounting. Companies shouldn’t have to adopt an auditor’s proposal. Yes, if we consider this case with North Face. You see Crawford new Deloitte’s materiality threshold and expected them to propose adjustments but ultimately pass due to the fact there was no assumed “Immaterial” impact. However, it was later realized that Crawford did not inform the Deloitte auditors of the $2.65 million portion of the barter transaction. It safer to purpose and report then purpose and pass. 2. Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors to conceal this information from their audit clients? I think so. It would avoid companies like North Face and individuals like Crawford to take advantage of these thresholds. I don’t know how feasible it would be since auditor’s live by certain standards and transparency. The goal of an auditor is to be objective and honest, by concealing materiality threshold they would doing the very thing they are trying impose. 3. Identify the general principles or guidelines that dictate when companies are entitled to record revenue. How were these principles or guidelines violated by the $7.8 million barter...
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...2001 by Eric Lefkofsky who had built several businesses around call centers and the Internet. In 2006, Lefkofsky became interested in an idea of Mason’s for a website that would act as a social media platform to bring people together with a common interest in some problem—most often some sort of social cause. Lefkofsky provided Mason with $1 million of capital to develop the concept that became known as “The Point.” Virtually no one associated with The Point initially envisioned commercial aspirations for the venture. In the fall of 2008, at the height of financial crisis, ventures with little or no commercial aspirations were in jeopardy. Lefkofsky and Mason faced a decision on how to proceed with The Point. Lefkofsky seized on an idea proposed by a group of users on The Point. This group attempted to identify a number of people who wanted to buy the same product, and then approach a seller for a group discount. Mason had originally mentioned group-buying as one application of The Point, and now Lefkofsky latched onto the concept and pursued it relentlessly. In response, Mason and his employees began a side project that they named Groupon. The business plan was relatively simple. Groupon offered vouchers via e-mail to its subscriber base that would provide discounts at local merchants. The vouchers were issued only after a critical number of subscribers expressed interest. At that...
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...Exposure Draft: Revenue Recognition (Topic 605): Revenue from Contracts with Customers The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have publishing this exposure draft as revenue is a vital number that financial statement users use to value a company’s performance. Both Boards require improvements in their revenue recognition requirements, therefore joined forces to refine the principles for revenue recognition. The goal of the FASB and the IASB is to “develop a common” revenue recognition principle that would: 1. Strengthen the current revenue recognition procedure; 2. Enhance revenue recognition procedures throughout organizations; and 3. Provide a simplified method of preparing financial statements. The proposal would affect all organizations that “enter into contracts to provide goods and services” (Financial Accounting Standards Board, June 2010) which they would normally provide. The following questions will be addressed to clarify our position on the Exposure Draft: Question 1: Paragraphs 12 – 19 (see Exhibit A) propose a principle (price interdependence) to help an entity determine whether to: a.) Combine two or more contracts and account for them as a single contract; b.) Segment a single contract and account for it as two or more contracts; and c.) Account for a contract modification as a separate contract or as part of the original contract. Do we agree with that principle...
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... | For decades the US financial market has stuck to accounting rules known as the Generally Accepted Accounting Principles, commonly abbreviated as U.S. GAAP, or simply GAAP. Just less than a year ago, there was the groundbreaking elimination of GAAP requirement for International Financial Reporting Standards (IFRS) reporting foreign issuers, due to a strong global support for IFRS. Then on August 27th 2008, the Securities Exchange Commission voted to publish for public comment a proposed Roadmap that could lead to the use of International Financial Reporting Standards (IFRS) by U.S. issuers beginning in 2014. Currently, U.S. issuers use U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Commission would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors. The proposed multi-year plan sets out several milestones that, if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the Commission (Navigating). The transition from U.S. GAAP to IFRS reporting will have a huge impact for investors and businesses in the U.S. Although only a roadmap was issued and no conversion dates were announced, it is speculated that IFRS reporting will more than likely become mandatory (Navigating). This article will present an overview on some of the most...
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...that if the auditor concludes that the client’s financial statements are materially misstated, then “the auditor should request management to make the necessary corrections” (312.64). This section goes on to discuss the documentation standards for “uncorrected misstatements” (see paragraphs 69-70). For example, auditors must document in their workpapers “whether uncorrected misstatements, individually or in the aggregate, do or do not cause the financial statements to be materially misstated, and the basis for that conclusion.” In summary, auditors’ lives would be considerably less complicated if clients would prepare an adjusting entry for each proposed audit adjustment, even those that are immaterial. Nevertheless, it is not reasonable for auditors to “insist” that clients record adjusting entries for immaterial proposed audit adjustments. 2. To the greatest extent possible, auditors should not provide clients with access to the critical parameters or facets of audit engagements, including materiality limits. Similar to what...
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...ACTG 630 – Case Assignment Due: Wednesday, December 3 Please submit one assignment per group. No more than 3 students per group. Read “Growing Pains at Groupon” by Dutta, Caplan and Marcinko (2014) and complete the questions included in the Case Requirements section (beginning on page 238). Instructions for accessing the FASB Codification database: 1. Go to http://aaahq.org/ascLogin.cfm 2. User ID: AAA51526 3. Password: x43AYtX ISSUES IN ACCOUNTING EDUCATION Vol. 29, No. 1 2014 pp. 229–245 American Accounting Association DOI: 10.2308/iace-50595 Growing Pains at Groupon Saurav K. Dutta, Dennis H. Caplan, and David J. Marcinko GROWING PAINS AT GROUPON s an undergraduate music major at Northwestern University, Andrew Mason eagerly sought a version of rock music that would fuse punk with the Beatles and Cat Stevens. Little did he imagine that within ten years he would be the CEO of one of history’s fastestgrowing businesses. After Northwestern and faded dreams of rock stardom, Mason, a self-taught computer programmer, was hired to write code by the Chicago firm InnerWorkings. InnerWorkings was founded in 2001 by Eric Lefkofsky, who had built several businesses around call centers and the Internet. In 2006, Lefkofsky became interested in an idea of Mason’s for a website that would act as a social media platform to bring people together with a common interest in some problem— Saurav K. Dutta is an Associate Professor and Dennis H. Caplan is an Assistant Professor, both at University...
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...Project added to IASB agenda | 5 December 2002 | Exposure Draft Business Combinations and related exposure drafts proposing amendments to IAS 36 and IAS 38 | 31 March 2004 | IFRS 3 Business Combinations and related amended versions of IAS 36 and IAS 38 IFRS 3 supersedes IAS 22 | 1 April 2004 | Generally: Business combinations agreed to after 31 March 2004. Special provisions for previously recognised goodwill, negative goodwill, intangible assets, and equity accounted investments. | 29 April 2004 | Exposure Draft of Proposed Amendments to IFRS 3 Combinations by Contract Alone or Involving Mutual Entities. After considering comments on this ED, the Board decided to include the issues addressed in the ED in the 30 June 2005 exposure draft. | RELATED INTERPRETATIONS | * Issues Relating to This Standard that IFRIC Did Not Add to Its Agenda | AMENDMENTS UNDER CONSIDERATION BY IASB | 30 June 2005 | Exposure Draft of substantial revisions to IFRS 3 | SUMMARY OF IFRS 3 | | Deloitte has published an 84-page book Business Combinations: A Guide to IFRS 3. The guide: * Outlines the key features of IFRS 3. * Provides illustrative examples to assist in applying the standard. * Discusses the requirements of IAS 36 Impairment of Assets and IAS 38 Intangible Assets as they relate to business combinations. * Includes guidance on determining fair value for the purposes of accounting for business combinations; an overview comparison between the requirements...
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...business combinations Intent => replace SFAS 141 and converge with international standards Will include mutual enterprises Will include acquisitions of businesses through means other than a purchase of net assets or equity interests A separate project is addressing business combinations involving not-for-profit organizations General principle: recognize assets acquired and liabilities assumed in a business combination at fair value Exceptions : income taxes, benefit plan obligations, operating leases Departure from the cost-based provisions in APB 16, which also appeared in SFAS 141 as originally issued Joint IASB-FASB Exposure Draft is available at the FASB’s website 4. Joint IASB-FASB project on business combinations Examples of proposed changes, relative to current practice Business combination achieved in stages Sometimes called a step acquisition Purchase consideration...
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...1996, North Face's went public. Initially, it sold at $14 per share, then peaked at $30 per share. In March 1999, NASDAQ halted public trading of North Face stock following the company's announcement it would be restating financial statements due to "bad bookkeeping".Christopher Crawford (CFO) boosted company sales by negotiating a barter transaction structured to avoid triggering materiality levels. Result: In May 2000, VF Corporation bought North Face for $2 per share. (Knapp, 2013) Question1 Should auditors insist that their clients accept all proposed audit adjustments, even those that have an "immaterial" effect on the given financial statements? Defend your answer. AnswerforQuestion1: • Auditors should not insist that clients accept all proposed audit adjustments. • Auditors are not perfect and clients should therefore have the right to reject proposed audit adjustments. • If a client does not accept a proposed audit adjustment, the auditor should generally be more suspicious as to the possibility of fraud and misstatement. Question2 Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors to conceal this information from their audit clients? AnswerforQuestion2: • Levels of materiality determine the nature, extent and timing of the substantive testing. • Auditors should not reveal materiality levels to their clients...
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...Name removed. GM 520- Week 2 Assignment Assignment: Pick an administrative agency of either the Federal or a State government. Find where the current and proposed regulation changes for that agency are located on the internet. (i.e. the Federal Register or the State Administrative Agency website.) Regulations.gov is a good place to begin your research. Pick one proposed regulation change currently under consideration (if you find one which has already closed out, but interests you, you can use that, instead) and write the following regarding it: 1. State the administrative agency which controls the regulation. Explain why this agency and your proposed regulation interests you (briefly). Will this proposed regulation affect you or the business in which you are working? If so, how? Submit a copy of the proposed regulation along with your responses to these five questions. The proposed regulation can be submitted as either a separate Word document (.doc) or Adobe file (.pdf). This means you will submit two attachments to the Week 2 Dropbox: (1) a Word doc with the questions and your answers and (2) a copy of the proposed regulation you used for this assignment. (10 points) 2. Describe the proposal/change. (10 points) 3. Write the public comment which you would submit to this proposal. If the proposed regulation deadline has already passed, write the comment you would have submitted. Explain briefly what you wish to accomplish with your comment. (10 points) 4. Provide the "deadline"...
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...financial reporting worldwide. IFRS, acronym for International Financial Reporting Standards are financial reporting standards that have been adopted by International Accounting Standard Board (IASB). Increasing number of publicly held companies in many countries are now requiring or allowing the use of IFRS for the preparation of financial statement. In the United States, the Securities and Exchange Commission (SEC) have also proposed a “Roadmap” in incorporating the convergence of US Generally Accepted Accounting Principles (US GAAP) to IFRS with the help of Financial Accounting Standards Board (FASB) and IASB. The IASB and FASB, committed to improving IFRS and US GAAP and achieving their convergence, are also committed in providing public transparency and accountability by reporting their process in achieving their goals. In 2006, the IASB and FASB began to set out their plans of completing major projects in their issued Memorandum of Understanding (MoU). These priority major projects comprises of their joint projects on financial instruments, revenue recognition, leasing, insurance contracts, the presentation of other comprehensive income, fair value measurement, and the consolidation of investment companies. Above that, the IASB will also work on the matter of improving disclosure of derecognized assets and other off balance sheet risks and also consolidations particularly in relation to structured entities. In their most...
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...Project In July, 2006, the Board voted to add to its agenda a project on lease accounting. The project will be conducted jointly with the US Financial Accounting Standards Board (FASB) and is expected to result in the publication of a joint discussion paper in 2008. The project will reconsider all aspects of lease accounting and is expected to fundamentally revise the way lease contracts are recognized in the financial statements of lessees and lessors. The Board directed the staff to establish a working group of individuals with significant experience and expertise in lease accounting to assist the staff and the Board with this project. (http://www.ifrs.org/Current+Projects/IASB+Projects/Leases/Meeting+Summaries+and+Observer+Notes/IASB+July+2006.htm) To explain the reason for adding the project to the agenda, I find two paragraphs in Exposure Draft that “Leasing is an important source of finance. Therefore, it is important that lease accounting should provide users of financial statements with a complete and understandable picture of an entity’s leasing activities. The existing accounting models for leases require lessees to classify their leases as either finance leases or operating leases. However, those models have been criticized for failing to meet the needs of users of financial statements because they do not provide a faithful representation of leasing transactions. In particular they omit relevant information about rights and obligations that meet the definitions...
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...Lease Accounting Update ( Learning objective After completing this chapter, you should be familiar with: A brief overview of the FAS B's proposed comprehensive new lease accounting guidance. I. The end is near... In May 2013, the FASB issued proposed ASU, Leases (Topic 842): a revision of the 2010 proposed Accountin-g Standards Update, Leases (Topic 840). The comment period ended in September 2013. Notice that the new lease accounting guidance is moving from FASB Accounting Standards Codification (ASC) 840, Leases, to a new Topic, ASC 842, Leases, which will supersede ASC 840. The new lease accounting guidance in ASC 842 will apply to all leases except for: Leases of intangible assets; Leases to explore for or use minerals, oil, natural gas, and similar non-regenerative resources; and Leases of biological assets, including timber. The new guidance is intended to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations, and the risks to which it is exposed from entering into leasing transactions. Under existing accounting standards, a majority of leases are not reported on a lessee's balance sheet even though the amounts involved can be substantial. In addition, lessees and lessors are required to classify their leases as either capital leases or operating leases and to account for those leases differently. For a lessee, capital lease assets and liabilities...
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...Indian Accounting Standards: Scope, Procedure and Compliance by Puneet Accounting Advertisements: Formation of the Accounting Standards Board: The Institute of Chartered Accountants of India, recognizing the need to harmonies the diverse accounting policies and practices at present in use in India, constituted an Accounting Standards Board (ASB) on 21st April, 1977. Scope and Functions of Accounting Standards Board: The main function of ASB is to formulate accounting standards so that such standards may be established by the Council of the Institute in India. While formulating the accounting standards, ASB will take into consideration the applicable laws, customs, usages and business environment. The Institute is one of the Members of the International Accounting Standards Committee (IASC) and has agreed to support the objectives of IASC. While formulating the Accounting Standards, ASB will give due consideration to International Accounting Standards, issued by IASC and try to integrate them, to the extent possible, in the light of the conditions and practices prevailing in India. The Accounting Standards will be issued under the authority of the Council. ASB has also been entrusted with the responsibility of propagating the Accounting Standards and of persuading the concerned parties to adopt them in the preparation and presentation of financial statements. ASB will issue guidance notes on the Accounting Standards and give clarifications on issues arising there from...
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