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introduction to accounting standards
introduction accounting standards
introduction accounting standards
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The Financial statement of a company allows an investor to see the flow of money from that particular company. It records the money going in as well as the money going out. The Financial Accounting Standards Board (FASB) has implemented rules on how the consolidated financial statements are presented, disclosed, as well as other rules that affect the variable interest and non-controlling interest. A Consolidated Financial Statement is used when you have a parent company along with its subsidiaries. Like the Financial Statement, the consolidated financial statement takes the flows of money from both the parent and subsidiaries and combines them into one statement hence this is why it is called consolidated. Knowing what information is required by the Financial Accounting Standards Board is very critical, so that information is not miss represented, and the company is reporting their company properly. The objective of the consolidated financial statement is to require the parent company that controls one or more other entities also known as subsidiaries to present the statement. The parent company must also present how much control they have over their subsidiary(s), and that control determines exactly what must be accounted for on the consolidated financial statement ( Warfield, Gribble, etc, 1996). Disclosures are another part in the financial statements, and are required by the Financial Accounting Standards Board. The purpose of the disclosure is to explain recognized items and provided relevant measures of items that are not measured on the financial statement as well as describing unrecognized items and provides a useful measurement for those items. What the disclosure does is provide d information to help the investor as... ... middle of paper ... ...erivative Instruments and Hedging Activities: an amendment of FASB statement No 133/ Level of authority: GAAP Level A: Miller GAAP Update Service 8.1. Retrieved from http://search.proquest.com.prx-keiser.lirn.net/docview/192391994/14335C8D2B118D6AB7A/1?accountid=35796 Warfield, T; Gribble, J; Lang, M; Lee, C. (1996) Response to the FASB Exposure Draft, “Proposed Statement of Financial Accounting Standards-Consolidated Financial Statements: Policy and Procedures:” Accounting Horizons 10.3 182-185. Retrieved from http://search.proquest.com.prx-keiser.lirn.net/docview/208901068/14335C45C80F4E580F/1?accountid=35796 Wilson, A.; Jones, J. (2004) New accounting guidance for variable interest entities: will the new rules reduce the risk? Balance Sheet 12.1 Retrieved from http://search.proquest.com.prx-keiser.lirn.net/docview/204699158/143351D7CA33B956889/2?accountid=35796
Financial Accounting Standards Board. (1985). Statement of Financial Accounting Standards No. 86. Norwalk. Retrieved April 7, 2014, from http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175820922177&blobheader=application%2Fpdf&blobheadername2=Content-Length&blobheadername1=Content-Disposition&blobheadervalue2=189998&blobheadervalue1=filename%3Dfas86.pdf&blobcol=url
The objective of financial reporting/statements is to provide information about the reporting entity’s financial performance and financial position that is useful to a wide range of users for assessing the stewardship of the entity’s management and for making economic decisions.
The goal of the Codification is to simplify the organization of thousands of authoritative U.S. accounting pronouncements issued by multiple standard-setters. To achieve this goal, the FASB initiated a project to integrate and topically organize all relevant accounting pronouncements issued by the U.S. standard-setters including those of the FASB, the American Institute of Certified Public Accountants (AICPA), and the Emerging Issues Task Force (EITF)
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
Due to the use of the company’s annual report for users to make decisions, ensuring that the financial reports convince the objective of general purpose financial reporting and qualitative characteristics of useful financial information as outlined in the IASB September 2010 ‘Conceptual Framework for Financial Reporting’ (CF) have become extremely important. Such failure of disclosures can mislead information on the company’s financial statements.
One of the most debatable topics in the accounting industry today is the extent in which we should make the financial statements understandable to the general population. The FASB currently gears its reporting standards toward...
An important part of financial planning for corporations is the annual report. Publically held companies are required to submit an annual report to the SEC and private companies, even though not required, can use an annual report to gauge the performance of the company for the past year and use the report to plan for the future. The financial statements that make up an annual report are the income statement, the balance sheet, and the statement of cash flows. (Melicher, 2014) Once all of the financial information has been compiled and the three statements that make up the annual report have been completed a corporation can then start to analyze the data. There are several different categories of financial ratios
Tiller, Mikel G., Jan R. Williams, and "Revenue Recognition Under New FASB Statements." The CPA Journal 52(1982)
To best serve the needs of SMEs, the BRP’s final recommendation to the FAF Board of Trustees is GAAP with exceptions and modifications under the direction of a new and separate private company standards board (BRP, 2011, p. 2). The new board with the oversight of the FAF would work closely with the FASB and a have final rule over exceptions and modifications to current U.S. GAAP (BRP, 2011, p. 2). Although the FAF did agree the best way to accommodate SMEs is exceptions and modifications to current U.S. GAAP, the Trustees did not agree with a separate private company board with final authority. In response, the FAF chose to establish a new board, the PCC, with final approval by the FASB despite the recommendation of a separate private board by the BRP and the AICPA (FAF, 2012, p. 2). It is important to realize that the FASB receives its funding from public organizations and the board’s primary focus is on structuring accounting standards that suit large business industries that report to the
Private and public accounting has long been discussed and disputed in regards to financial reporting. Since the Financial Accounting Standards Board (FASB) was created in 1973, accountants have called for different accounting regulations for private and public accounting sectors, as private companies do not have the resources to meet the complex requirements of public companies. Private companies currently are not required by law to issue annual or quarterly financial statements (James, 2012). Private companies do, however, have the option to apply the U.S. Generally Accepted Accounting Principles (GAAP), cash basis, or accrual accounting to their financial statements (James, 2012).
A consolidated financial statement can be defined as the financial statements of a parent and its subsidiaries combined to form a single economic entity (AASB 10, 2011). The entity, which acquires the other entity, is known as the parent and the entity, which has been acquired, is known as the subsidiary. Consolidation financial reports arise when one entity purchases another entity, to then form a group.
In 1996 the Financial Accounting Standards Board (FASB) issued FAS 125: Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities to address off-balance sheet (OBS) accounting. FAS 125 required the recognition of assets an entity controls and the liabilities it incurred after the transfer of financial assets. And subsequently, the entity must de-recognize assets and liabilities when it no longer controls them. FAS 125 also defined the
Moreover, for the single reporting entity, there is a variety of procedural steps that must be taken and understood in order to ensure the proper accounting. For instance, the starting point for the preparation of consolidated statements begin with the separate financial statements of the companies and after some adjustments and eliminations of amounts they are added together in order to create appropriate consolidated financial statements. Additionally, a few steps that can be taken into account to properly create consolidated financial statements are as follows:
As we already know, financial statement is the most important aspect that every company should have as a reference for any decision making in term of loan, project, operation and other related matters. Because management of any business requires a flow of information to make informed, intelligent decisions affecting the success or failure of its operations. Investors need statements to analyze investment potential Banks require financial statements to decide whether or not to loan money, and many companies need statements to ascertain the risk involved in doing business with their customers and suppliers. Because of these reasons, it is essential to have comparability and consistency on financial statement for decision making process then lead company to perform well in their business and boost the profitability as well.
The second organization was designed by the SEC in 1973. The FASB was designed with the purpose of creating financial accounting and reporting standards for the public. “The mission of the FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information” (FASB n.d. ¶ 3). The FASB is designed much like the FASB in which they are to protect the public from fraud and misleading information from the company.