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ACTG 3110 PowerPoint Presentation

ACTG 3110

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ACTG 3110

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  1. ACTG 3110 Chapter 1 - Financial Accounting and Accounting Standards

  2. Overview • What is accounting? • Financial versus Managerial accounting • Importance of financial accounting • Who provides it • Who uses it • Financial Statements • Balance Sheet • Income Statement • Statement of Cash Flows • Statement of Owner’s Equity

  3. Challenges Facing Financial Accounting • Nonfinancial Measurements • Forward-looking Information • Soft Assets • Timeliness

  4. Overview • Economic Environment and Financial Reporting • Capital markets • Corporate form of business • Secondary versus primary market • Cash versus accrual accounting • Need for GAAP • Generally Accepted Accounting Principles (GAAP)

  5. Parties Involved in Standard Setting • Securities and Exchange Commission (SEC) • 1933 and 1934 Acts • Oversight role • Enforcement • American Institute of CPAs (AICPA) • Committee of Accounting Procedure (CAP) • 1938 - 1959 • Formed by AICPA • Issued 51 Accounting Research Bulletins

  6. Parties Involved in Standard Setting • AICPA • Accounting Principles Board (APB) • 1959-1973 • Formed by AICPA • Issued 31 APB Opinions & 4 statements • Financial Accounting Standards Board (FASB) • 1973 – Present • Established Due Process

  7. Parties Involved in Standard Setting • Accounting Standards Executive Committee (AcSEC) • Committee of the AICPA to respond to FASB • Emerging Issues Task Force (EITF) • Set up by the FASB • Deals with immediate problems

  8. FASB • Supported by the Financial Accounting Foundation • 7 voting members are full time employees • Members must not retain investments in companies • Includes CPAs, Business people, and Academicians • More influential than CAP or APB

  9. House of GAAP • Most Authoritative • CAP’s Accounting Research Bulletins (ARBs) • APB Opinions • FASB’s Statements of Financial Accounting Concepts (SFAC) • FASB’s Statements of Financial Accounting Standards (SFAS)

  10. House of GAAP • Second most authoritative: • FASB Technical Bulletins • AICPA Statements of Positions (SOP) • AICPA Industry Audit and Accounting Guides • Third most authoritative: • EITF Statements • AICPA AcSEC Practice Bulletins

  11. House of GAAP • Least authoritative • AICPA Accounting Interpretations • FASB Implementation Guides • Widely recognized and prevalent industry practices • HOWEVER, SEC is overall ruler on GAAP; may override private sector FASB

  12. Enforcement of Standards • SEC • AICPA code of Ethics • State Boards of Accountancy • Courts • Bankers

  13. Issues in Financial Reporting • Standard Setting in a Political Environment • Expectations Gap • Sarbanes-Oxley Act of 2002 (SOX) • Public Oversight Board of Accountancy (PCBOA) • International Accounting Standards Board (IASB) • Rules-based versus Principles-based approaches to GAAP

  14. Ethics in Accounting • AICPA Code of Ethics • IMA Code of Ethics • IIA Code of Ethics • Company’s Codes of Ethics • Basic morals