Intermediate accounting 13th kieso warfield chapter 01

Chapter 1-1 CHAPTER FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Chapter 1-2 Learning Learning Objectives Objectives Identify the major financial statements and other means of financial reporting Explain how accounting assists in the efficient use of scarce resources Describe some of the challenges facing accounting List the objectives of financial reporting Explain the need for accounting standards Identify the major policy-setting bodies and their role in the standard-setting process Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP Describe the impact of user groups on the rule-making process Understand issues related to ethics and financial accounting Chapter 1-3 Financial Financial Accounting Accounting and and Accounting Accounting Standards Standards Financial Statements and Financial Reporting Accounting and capital allocation Challenges Objectives Need to develop standards Chapter 1-4 Parties Involved in Standard Setting Securities and Exchange Commission American Institute of CPAs Financial Accounting Standards Board Changing role of the AICPA Generally Accepted Accounting Principles FASB Codification Issues in Financial Reporting Political environment Expectations gap International accounting standards Ethics Financial Financial Statements Statements and and Financial Financial Reporting Reporting Essential characteristics of accounting are: (1) the identification, measurement, and communication of financial information about (2) economic entities to (3) interested parties Chapter 1-5 LO Identify the major financial statements and other means of financial reporting Financial Financial Statements Statements and and Financial Financial Reporting Reporting Economic Entity Financial Statements Additional Information Financial Information Balance Sheet President’s letter Income Statement Prospectuses, Statement of Cash Flows SEC Reporting Accounting? Identifies and Measures and Communicates Statement of Owners’ or Stockholders’ Equity Note Disclosures GAAP Chapter 1-6 News releases Forecasts Environmental Reports Etc Not GAAP LO Identify the major financial statements and other means of financial reporting Financial Financial Statements Statements and and Financial Financial Reporting Reporting Review What is the purpose of information presented in notes to the financial statements? a To provide disclosure required by generally accepted accounting principles b To correct improper presentation in the financial statements c To provide recognition of amounts not included in the totals of the financial statements d To present management’s responses to auditor comments Chapter 1-7 LO Identify the major financial statements and other means of financial reporting Accounting Accounting and and Capital Capital Allocation Allocation Resources are limited Efficient use of resources often determines whether a business thrives Illustration 1-1 Capital Allocation Process Financial Financial Reporting Reporting Information to help users with capital allocation decisions Chapter 1-8 Users Users Investors, creditors, and other users Capital CapitalAllocation Allocation The process of determining how and at what cost money is allocated among competing interests LO Explain how accounting assists in the efficient use of scare resources Accounting Accounting and and Capital Capital Allocation Allocation Review An effective process of capital allocation is critical to a healthy economy, which a promotes productivity b encourages innovation c provides an efficient and liquid market for buying and selling securities d All of the above Chapter 1-9 LO Explain how accounting assists in the efficient use of scare resources Challenges Challenges Facing Facing Financial Financial Accounting Accounting Nonfinancial Measurements Forward-looking Information Soft Assets Timeliness Chapter 1-10 LO Describe some of the challenges facing accounting Types Types of of Pronouncements Pronouncements Issued by the FASB: Standards, Interpretations, and Staff Positions Financial Accounting Concepts Emerging Issues Task Force Statements Chapter 1-21 LO Identify the major policy-setting bodies and their role in the standard-setting process Types Types of of Pronouncements Pronouncements CA1-11 (Accounting Pronouncements) Standard setting bodies have issued a number of authoritative pronouncements A list is provided on the left, below, with a description of these pronouncements on the right (d) (f) (c) (e) (a) (b) Chapter 1-22 LO Identify the major policy-setting bodies and their role in the standard-setting process Changing Changing Role Role of of AICPA AICPA The AICPA established the Accounting Standards Executive Committee (AcSEC):  Audit and Accounting Guides  Statements of Position (SOP)  Practice Bulletins AICPA and AcSEC no longer issues authoritative accounting guidance for public companies PCAOB oversees the development of auditing standards AICPA continues to develop and grade the CPA examination Chapter 1-23 LO Identify the major policy-setting bodies LO and their role in the standard-setting process Generally Generally Accepted Accepted Accounting Accounting Principles Principles Those principles that have substantial authoritative support Major sources of GAAP are: FASB Standards, Interpretations, and Staff Positions APB Opinions AICPA Accounting Research Bulletins Chapter 1-24 LO Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP Generally Generally Accepted Accepted Accounting Accounting Principles Principles Illustration 1-4 GAAP Documents Chapter 1-25 LO Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP Generally Generally Accepted Accepted Accounting Accounting Principles Principles Review Which of the following accounting pronouncements is the most authoritative? a FASB Statement of Financial Accounting Concepts b FASB Technical Bulletins c AICPA Accounting Principles Board Opinion d AICPA Statement of Position Chapter 1-26 LO Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP Issues Issues in in Financial Financial Reporting Reporting Standard Setting in a Political Environment Accounting standards are as much a product of political action as they are of careful logic or empirical findings Chapter 1-27 LO Describe the impact of user groups on the rule-making process Standard Standard Setting Setting Business BusinessEntities Entities CPAs CPAsand and Accounting AccountingFirms Firms AICPA AICPA(AcSEC) (AcSEC) Financial Financial Community Community FASB FASB Preparers Preparers (e.g., (e.g.,FEI) FEI) Government Government Academicians Academicians (SEC, (SEC,IRS, IRS,other other agencies) agencies) Investing InvestingPublic Public Accounting standards, interpretations, and bulletins Chapter 1-28 Illustration 1-6 User Groups that Influence Accounting Standards Industry Industry Associations Associations LO Describe the impact of user groups on the rule-making process Issues Issues in in Financial Financial Reporting Reporting Review: All those who serve on the FASB must be Certified Public Accountants False Chapter 1-29 LO Describe the impact of user groups on the rule-making process Issues Issues in in Financial Financial Reporting Reporting Expectation Gap What the public thinks accountants should vs what accountants think they can Difficult to close Sarbanes-Oxley Act (2002) Public Company Accounting Oversight Board (PCAOB) Chapter 1-30 LO Describe the impact of user groups on the rule-making process Issues Issues in in Financial Financial Reporting Reporting International Accounting Standards Two sets of standards accepted for international use: U.S GAAP, issued by the FASB International Financial Reporting Standards (IFRS), issued by the IASB FASB and IASB recognize that global markets will best be served if only one set of GAAP is used Chapter 1-31 LO Describe the impact of user groups on the rule-making process Issues Issues in in Financial Financial Reporting Reporting CA1-9 (GAAP Terminology): With accounting and finance, it often helps to be fluent in abbreviations and acronyms Instructions: Presented below is a list of common accounting acronyms Identify the term for which each acronym stands, and provide a brief definition of each term Chapter 1-32 (a) AICPA (e) FAF (i) CPA (b) CAP (f) FASAC (j) FASB (c) ARB (g) SOP (k) SEC (d) APB (h) GAAP (l) IASB LO Understand issues related to ethics and financial accounting Issues Issues in in Financial Financial Reporting Reporting Ethics in the Environment of Financial Accounting In accounting, we frequently encounter ethical dilemmas GAAP does not always provide an answer Doing the right thing is not always easy or obvious Chapter 1-33 LO Understand issues related to ethics and financial accounting Diversity in Practice Chapter 1-34  iGAAP includes the standards, referred to as International Financial Reporting Standards (IFRS), developed by the IASB  Differences between U.S GAAP and iGAAP exist because of different user needs  iGAAP tends to be simpler and less stringent than U.S GAAP  Regulators have recently eliminated the need for foreign companies that trade shares in U.S markets to reconcile their accounting with U.S GAAP Copyright Copyright Copyright © 2009 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Chapter 1-35 .. .CHAPTER FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Chapter 1-2 Learning Learning Objectives... financial accounting Chapter 1-3 Financial Financial Accounting Accounting and and Accounting Accounting Standards Standards Financial Statements and Financial Reporting Accounting and capital... Committee Committee on on Accounting Accounting Procedures Procedures Chapter 1-16 Accounting Accounting Principles Principles Board Board  1939 to 1959  1959 to 1973  Issued 51 Accounting Research