Kế toán, kiểm toán - Chương 1: Financial accounting and accounting standards

C H A P T E R 1FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDSIntermediate Accounting13th EditionKieso, Weygandt, and Warfield 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.Learning ObjectivesSecurities and Exchange CommissionAmerican Institute of CPAsFinancial Accounting Standards BoardChanging role of the AICPAFinancial Statements and Financial ReportingParties Involved in Standard SettingGenerally Accepted Accounting PrinciplesIssues in Financial ReportingAccounting and capital allocationChallenges ObjectivesNeed to develop standardsFASB CodificationPolitical environmentExpectations gapInternational accounting standardsEthicsFinancial Accounting and Accounting StandardsLO 1 Identify the major financial statements and other means of financial reporting..Financial Statements and Financial ReportingEssential characteristics of accounting are:the identification, measurement, and communication of financial information about economic entities to interested parties. Financial InformationAccounting?Identifiesand Measuresand CommunicatesBalance SheetIncome StatementStatement of Cash FlowsStatement of Owners’ or Stockholders’ EquityNote DisclosuresPresident’s letter Prospectuses,SEC ReportingNews releasesForecasts Environmental Reports Etc.GAAPNot GAAPFinancial StatementsAdditional InformationEconomic EntityLO 1 Identify the major financial statements and other means of financial reporting..Financial Statements and Financial ReportingLO 1 Identify the major financial statements and other means of financial reporting..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.ReviewFinancial Statements and Financial ReportingAccounting and Capital AllocationResources are limited. Efficient use of resources often determines whether a business thrives.Financial ReportingInformation to help users with capital allocation decisions.UsersInvestors, creditors, and other usersCapital AllocationThe process of determining how and at what cost money is allocated among competing interests.LO 2 Explain how accounting assists in the efficient use of scare resources.Illustration 1-1 Capital Allocation ProcessAn effective process of capital allocation is critical to a healthy economy, whicha. promotes productivity.b. encourages innovation. c. provides an efficient and liquid market for buying and selling securities.d. All of the above.Accounting and Capital AllocationLO 2 Explain how accounting assists in the efficient use of scare resources.ReviewChallenges Facing Financial AccountingNonfinancial MeasurementsForward-looking InformationSoft AssetsTimelinessLO 3 Describe some of the challenges facing accounting.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 AccountingLO 4 List the objectives of financial reporting.All of the following are objectives of financial reporting except to provide informationa. About enterprise resources, claims to those resources, and changes in them.b. That is useful in investment and credit decisions. c. About the management and major shareholders of an enterprise.d. That is useful in assessing cash flow prospects.Objectives of Financial AccountingLO 4 List the objectives of financial reporting.ReviewNeed to Develop StandardsVarious users need financial informationThe accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced.Financial StatementsBalance SheetIncome StatementStatement of Stockholders’ EquityStatement of Cash FlowsNote DisclosureGenerally Accepted Accounting Principles (GAAP)LO 5 Explain the need for accounting standards.Parties Involved in Standard SettingThree organizations:Securities and Exchange Commission (SEC)American Institute of Certified Public Accountants (AICPA)Financial Accounting Standards Board (FASB)LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.Securities Act of 1933Securities Act of 1934Securities and Exchange CommissionEstablished by federal governmentAccounting and reporting for public companiesEncouraged private standard-setting bodySEC requires public companies to adhere to GAAPSEC OversightEnforcement AuthorityLO 6 Identify the major policy-setting bodies and their role in the standard-setting process.American Institute of CPAsNational professional organizationEstablished the following:LO 6Committee on Accounting ProceduresAccounting Principles Board1939 to 1959Issued 51 Accounting Research Bulletins (ARBs)Problem-by-problem approach failed1959 to 1973Issued 31 Accounting Principle Board Opinions (APBOs)Wheat Committee recommendations adopted in 1973 Accounting Standards BoardWheat Committee’s recommendations resulted in the creation of a the Financial Accounting Standards Board in 1973.Financial Accounting FoundationSelects members of the FASB Funds their activities Exercises general oversight.Financial Accounting Standards BoardFinancial Accounting Standards Advisory CouncilMission to establish and improve standards of financial accounting and reporting.Consult on major policy issues.LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.Missions is to establish and improve standards of financial accounting and reporting. Differences between FASB and APB include:Financial Accounting Standards BoardSmaller MembershipFull-time, Remunerated MembershipGreater AutonomyIncreased IndependenceBroader Representation 6 Identify the major policy-setting bodies and their role in the standard-setting process.The first step taken in the establishment of a typical FASB statement is a. The board conducts research and analysis and a discussion memorandum is issued.b. A public hearing on the proposed standard is held.c. The board evaluates the research and public response and issues an exposure draft.d. Topics are identified and placed on the board’s agenda.Financial Accounting Standards BoardReviewLO 6 Identify the major policy-setting bodies and their role in the standard-setting process.FASB relies on two basic premises:Responsive to entire economic communityOperate in full view of the publicDue ProcessStep 1 = Topic placed on agendaStep 2 = Research conducted and Discussion Memorandum issued.Step 3 = Public hearingStep 4 = Board evaluates research, public response and issues Exposure DraftStep 5 = Board evaluates responses and issues final Statement of Financial Accounting StandardLO 6 Identify the major policy-setting bodies and their role in the standard-setting process.Issued by the FASB:Types of PronouncementsStandards, Interpretations, and Staff Positions.Financial Accounting ConceptsEmerging Issues Task Force StatementsLO 6 Identify the major policy-setting bodies and their role in the standard-setting process.Types of PronouncementsLO 6 Identify the major policy-setting bodies and their role in the standard-setting process.(d)(f)(c)(e)(a)(b)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.The AICPA established the Accounting Standards Executive Committee (AcSEC):Audit and Accounting GuidesStatements of Position (SOP)Practice BulletinsChanging Role of AICPALO 6AICPA 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.LO 6 Identify the major policy-setting bodies and their role in the standard-setting process.Generally Accepted Accounting PrinciplesThose principles that have substantial authoritative support. Major sources of GAAP are:FASB Standards, Interpretations, and Staff PositionsAPB OpinionsAICPA Accounting Research BulletinsLO 7 Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP.Generally Accepted Accounting PrinciplesLO 7 Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP.Illustration 1-4 GAAP DocumentsWhich 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.Generally Accepted Accounting PrinciplesReviewLO 7 Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP.Issues in Financial ReportingStandard Setting in a Political Environment Accounting standards are as much a product of political action as they are of careful logic or empirical findings. LO 8 Describe the impact of user groups on the rule-making process. FASBPreparers (e.g., FEI)Financial Community Government (SEC, IRS, other agencies)Industry AssociationsBusiness EntitiesCPAs andAccounting FirmsAICPA (AcSEC)AcademiciansInvesting PublicAccounting standards, interpretations, and bulletinsStandard SettingIllustration 1-6 User Groups that Influence Accounting StandardsLO 8 Describe the impact of user groups on the rule-making process. All those who serve on the FASB must be Certified Public Accountants.Review:Issues in Financial ReportingFalseLO 8 Describe the impact of user groups on the rule-making process. Issues in Financial ReportingExpectation Gap What the public thinks accountants should do vs. what accountants think they can do.Difficult to closeSarbanes-Oxley Act (2002)Public Company Accounting Oversight Board (PCAOB)LO 8 Describe the impact of user groups on the rule-making process. Issues in Financial ReportingInternational Accounting Standards Two sets of standards accepted for international use:U.S. GAAP, issued by the FASBInternational 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.LO 8 Describe the impact of user groups on the rule-making process. Issues in Financial ReportingLO 9 Understand issues related to ethics and financial accounting. 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. (a) AICPA (e) FAF (i) CPA (b) CAP (f) FASAC (j) FASB (c) ARB (g) SOP (k) SEC (d) APB (h) GAAP (l) IASBIssues in Financial ReportingEthics in the Environment of Financial Accounting In accounting, we frequently encounter ethical dilemmas.GAAP does not always provide an answerDoing the right thing is not always easy or obviousLO 9 Understand issues related to ethics and financial accounting. Diversity in PracticeiGAAP 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.CopyrightCopyright © 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.