Chapter 1 - Solution Manual

Accounting by creditors for impairment of a loan

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Accounting by Creditors for Impairment of a Loan, described in paragraph 24 of FASB Statement No. 118, Accounting by Creditors for Impairment of a Loan—Income Recognition and Disclosures e. Stock compensation for nonpublic and other entities (originally addressed by FASB Statement No. 123, Accounting for Stock-Based Compensation, or APB Opinion No. 25, Accounting for Stock Issued to Employees ) described in paragraph 83 of FASB Statement No. 123 (revised 2004), Share-Based Payment f. For nonpublic entities electing the deferral of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, FASB Statement No. 109, Accounting for Income Taxes, and related standards g. For business combinations with an acquisition date before the first annual reporting period beginning on or after December 15, 2008, Statement 141 and any other relevant standards h. For not-for-profit entities, pooling of interests as allowed for under Opinion 16, even though it has been superseded by Statement 141 until FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions, is effective i. For goodwill and intangible assets arising from a combination between two or more not-for-profit entities or acquired in the acquisition of a for-profit business entity by a not-for-profit entity until Statement 164 is effective, Opinion 16 and APB Opinion No. 17, Intangible Assets. Room for Debate Debate 1-1 This question has no one correct answer. It is meant to get students talking about something that they probably haven’t thought about before. Students in favor of the SEC being the rule making body could argue that the FASB has failed to ensure that financial statements fairly present the resultsofoperations. They could then cite the recent scandals. They could argue that the SEC has the power to regulate and they don’t see why the profession should then need to be self regulated. They could also argue that under the FASB there is too much flexibility and too much reliance on managerial intent, thereby allowing management to manage earnings and otherwise manipulate its financial statements. Moreover, lack of exercise of government direct oversight could result in diminishing the effectiveness of accountants to audit due to a potential erosion of independence. They could point to Sarbanes-Oxley. Students in favor of the FASB making the rules could argue against big government. They could point out that government sets accounting standards in countries that are not capitalistic. The result in those countries is a cookie cutter approach to financial statements and lack of flexibility that leaves no room for professional judgment. Whereas, the standards provided by the FASB are aimed to provide financial statements that fairly present financial statements, taking into consideration the circumstances in which a company operates. They could also argue that accountants, not government officials, best understand their role and how best to measure and report financial information.
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31 Debate 1-2 Should the scope of accounting standards be narrowed further?
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