Week 1 - Ch 1-5

Week 1 - Ch 1-5 - C H A P T E R C H A P T E R 1 1 FINANCIAL...

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Unformatted text preview: C H A P T E R C H A P T E R 1 1 FINANCIAL ACCOUNTING AND FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS ACCOUNTING STANDARDS Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Financial Statements and Financial Reporting Financial Statements and Financial Reporting Essential characteristics of accounting are: (1) the identification , measurement , and communication of financial information about (2) economic entities to (3) interested parties. Financial reporting should provide information that: Financial reporting should provide information that: (a) is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. (b) helps present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts. (c) clearly portrays the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events, and circumstances that change its resources and claims to those resources. Objectives of Financial Accounting Objectives of Financial Accounting Need to Develop Standards Need to Develop Standards Various users need financial information The accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced. Financial Statements Balance Sheet Income Statement Statement of Stockholders’ Equity Statement of Cash Flows Note Disclosure Generally Accepted Generally Accepted Accounting Principles Accounting Principles (GAAP) (GAAP) Committee on Accounting Procedure (“CAP”) Accounting Principles Board (“APB”) AICPA Financial Accounting Foundation (“FAF”) Financial Accounting Standars Board (“FASB”) 1939 – 1959: •Established to address issue of uniformity in acctg. •Published Accounting Research Bulletins (“ARBs”) designed to narrow accounting practices •Approach was on a problem-by-problem basis rather than a cohesive development of standards 1959 – 1973: •Designed to advance written expression of accounting principles and determine appropriate practices in the form of APB Opinions •Operated in hostile environment and viewed as over-reactive and ill-equipped to develop necessary accounting framework 1973 – Present: •Establish and improve standards of financial acctg. •Designed to be responsive to needs of economic community (and not just accountants) and operate in the full view of public through “due process” system •7 full-time, remunerated members with broader representation (not required to be CPA) • Issues Standards, Interpretations, Staff Positions, Concepts, and Emerging Issue Task Force Statements HISTORY OF US GAAP Generally Accepted Accounting Principles Generally Accepted Accounting Principles Illustration 1-4 GAAP Documents GAAP refers to those principles that have substantial authoritative support . Generally Accepted Accounting Principles Generally Accepted Accounting Principles...
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This note was uploaded on 03/02/2011 for the course ACC 541 taught by Professor Billvabunker during the Winter '11 term at DePaul.

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Week 1 - Ch 1-5 - C H A P T E R C H A P T E R 1 1 FINANCIAL...

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