Study Guide Exam 1 - Study Guide Exam 1 Chapter 1...

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Study Guide Exam 1 Chapter 1 Organizations Involved in Standard Setting 1. Security and Exchange Commission (SEC) a. Created by SEC Act of 1934 b. Public companies are required to file financial statements with the SEC c. SEC has ultimate authority to prescribe accounting principles d. SEC has delegated standard setting to the accounting profession e. Has power to issue a “deficiency letter” or a “stop order” for deficiencies in financial reporting f. SEC Issues i. Financial Reporting Releases (FRR’s) 2. American Institute of Certified Public Accountants (AICPA) a. The private sector organization of professional accountants b. 1939 – 1959 appointed the Committee on Accounting Principles (CAP) i. Issued Accounting Research Bulletins c. 1959 – 1973 appointed the Accounting Principles Board (APB) i. Issued APB Opinions d. Presently the Accounting Standards Executive Committee (AcSEC) i. The senior technical committee authorized to speak for the AICPA ii. Written communications of the AcSEC are: 1. Audit and Accounting Guidelines – provide specific guidance for certain industries or areas not addressed by the FASB 2. Statements of Position (SOP) – provide guidance on topics until the FASB sets a standard 3. Practice Bulletin – presents the AcSEC’s views on narrow issues not covered by the FASB 3. Financial Accounting Standards Board (FASB) a. The current standard setting organization in accounting b. Seven full time members, appointed for five year terms c. Independent from other accounting organizations and the SEC d. Advantages of the FASB compared to earlier organizations i. Smaller membership ii. Full time members iii. Greater autonomy and independence iv. Broader representation by members e. Documents that FASB issues: i. Statements of Financial Accounting Standards (SFAS’s) – the main standard issued by the FASB ii. FASB interpretations – represent modifications or clarifications of existing standards iii. Statements of Financial Accounting Concepts (SFAC’s) – the conceptual framework iv. FASB Staff Positions – provide interpretive guidance and minor amendments to standards v. FASB Technical Bulletins – provide timely guidance on specific issues (no longer used) vi. Emerging Issue Task Force (EITF) Statements – statements on how to account for new and unusual financial transactions before theses issues are addressed by the FASB. f. “Due Process” before issuing an official SFAS i. Identify a topic for consideration and place on the FASB agenda ii. Conduct research on the issue iii. Issue a Discussion Memorandum (DM) of the pros and cons iv. Hold a public hearing and gather public feedback v. Evaluate the feedback and conduct more research vi. Issue an Exposure Draft vii. Gather more public feedback viii. Evaluate feedback and reach a consensus ix. Issue the formal Statement of Financial Accounting Standards 4. Government Accounting Standards Board (GASB) a. Addresses issues related to state and local government accounting
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Study Guide Exam 1 - Study Guide Exam 1 Chapter 1...

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