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1-1 CHAPTER 1 THE ENVIRONMENT OF FINANCIAL REPORTING CONTENT ANALYSIS OF CASES Number Content Time Range (minutes) C1-1 Pronouncements . Matching a list of descriptive statements with a list of pronouncements establishing or related to generally accepted accounting principles. 5-10 C1-2 Accounting Organizations . Matching of a list of descriptive statements with a list of abbreviations of accounting organizations. Identify complete name of each organization. 10-15 C1-3 History of Establishment of GAAP . Discuss CAP, APB, FASB, and related pronouncements. 15-30 C1-4 (AICPA adapted). Accounting Principles . Define accounting principles. Discuss sources of GAAP. 10-20 C1-5 (CMA adapted). Standard Setting . Describe why there is political action and social involvement in the standard setting process. 10-20 C1-6 Organization of the FASB . Summarize the structure of the FASB, its documents (GAAP pronouncements), and its operating procedures. 10-20 C1-7 GAAP and the AICPA . Summarize the GAAP-related documents published by the AICPA. 5-10 C1-8 Code of Professional Conduct . Identify, briefly discuss, and provide examples to illustrate the first five principles of CPC. 10-20 C1-9 GAAP Hierarchy . Define GAAP, indicate where to find GAAP, and identify which GAAP are more important (hierarchy). 10-20 C1-10 Lobbying the FASB . Discuss pros and cons of lobbying FASB by interested parties. 5-15 C1-11 Ethical Dilemma . Discuss steps to take in an ethical dilemma ("misplaced" book in library). 10-20 C1-12 Ethical Responsibilities . Discuss steps to take in an ethical dilemma (cheating by friend on exam). 10-20 C1-13 (Appendix) International Convergence . Discuss convergence of U.S. GAAP and international accounting standards. Include discussion of SEC and its role in this convergence. 15-30
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1-2 ANSWERS TO QUESTIONS Q1-1 Primary markets are those capital markets where the exchanges of stocks and bonds are directly between a corporation and investors. Secondary markets are those where the exchanges are among the investors themselves. Q1-2 The users of financial information can be divided into two major categories: external users and internal users. These two groups do not have the same decision making information needs because of their differing relationships with the company providing economic information. External users need information for three basic decisions-- whether to buy, to hold, or to sell (or in the case of creditors, whether to extend credit, maintain the credit relationship, or not extend credit). These users rely mainly on financial statements in their decision processes. Internal users (i.e., a company's management) need information to make planning and operating decisions, and may request any information they need which the accounting system is capable of providing.
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This note was uploaded on 10/06/2011 for the course FINANCE 101 taught by Professor Uuu during the Spring '11 term at Universidad Metropolitana.

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