This document provides an overview of financial accounting and reporting standards. It discusses how financial accounting provides information to external users like investors and creditors to help them make investment and lending decisions. The key financial statements of balance sheet, income statement, statement of cash flows, and statement of shareholders' equity are outlined. The development of accounting standard setting bodies in the U.S. like the FASB and efforts to converge U.S. GAAP with international IFRS standards are summarized. The role of auditors in encouraging high-quality financial reporting and reforms like the Sarbanes-Oxley Act are also briefly described.
Unleashing Competitiveness on the Cloud Continuum | Accentureaccenture
Accenture reports how the cloud continuum creates a seamless technology & capability foundation that meets business needs now and in the future. Read more.
5 Opportunities in the Nutritional Supplements IndustryL.E.K. Consulting
According to the third installment of a biennial survey L.E.K. Consulting conducted on the healthy living marketplace, U.S. adult consumers spend, on average, a reported $635 on nutritional supplements each year: $433 on vitamins, minerals and herbal supplements (VMS), and $202 on sports nutrition products. And yet, within both categories, there is still room for further growth.
Indeed, when asked about their prior month’s purchases, just 55% of consumers who make H&W a priority said they bought VMS, and only 25% had purchased sports nutrition products. In other words, for retailers and brands there are some significant opportunities — and even a lurking threat — to be found.
PwC’s new Golden Age Index – how well are countries harnessing the power of o...PwC
One of the key megatrends affecting the UK and most other developed countries is an ageing population. Harnessing the potential of older workers will therefore become an increasingly important source of competitive advantage for both nations and businesses.
To explore how the UK compares with other OECD economies in this regard, PwC has developed a new ‘Golden Age index’ comparing how well they are utilising workers aged 55 and over. The index includes relative employment, earnings and training rates for older workers for 34 OECD countries over the period since 2003.
REPORT CAN BE FOUND HERE:
https://www.slideshare.net/Shooger/culture-of-poverty-in-the-philippines-report-125513457
Presentation for IMG106(313) - Cross-Cultural Studies in Management (Kasem Bundit University) based on the report - The Culture of Poverty in the Philippines
Unleashing Competitiveness on the Cloud Continuum | Accentureaccenture
Accenture reports how the cloud continuum creates a seamless technology & capability foundation that meets business needs now and in the future. Read more.
5 Opportunities in the Nutritional Supplements IndustryL.E.K. Consulting
According to the third installment of a biennial survey L.E.K. Consulting conducted on the healthy living marketplace, U.S. adult consumers spend, on average, a reported $635 on nutritional supplements each year: $433 on vitamins, minerals and herbal supplements (VMS), and $202 on sports nutrition products. And yet, within both categories, there is still room for further growth.
Indeed, when asked about their prior month’s purchases, just 55% of consumers who make H&W a priority said they bought VMS, and only 25% had purchased sports nutrition products. In other words, for retailers and brands there are some significant opportunities — and even a lurking threat — to be found.
PwC’s new Golden Age Index – how well are countries harnessing the power of o...PwC
One of the key megatrends affecting the UK and most other developed countries is an ageing population. Harnessing the potential of older workers will therefore become an increasingly important source of competitive advantage for both nations and businesses.
To explore how the UK compares with other OECD economies in this regard, PwC has developed a new ‘Golden Age index’ comparing how well they are utilising workers aged 55 and over. The index includes relative employment, earnings and training rates for older workers for 34 OECD countries over the period since 2003.
REPORT CAN BE FOUND HERE:
https://www.slideshare.net/Shooger/culture-of-poverty-in-the-philippines-report-125513457
Presentation for IMG106(313) - Cross-Cultural Studies in Management (Kasem Bundit University) based on the report - The Culture of Poverty in the Philippines
EY Price Point: global oil and gas market outlookEY
As the last quarter of the second pandemic year draws to a close, we continue to see heightened contrast
between the medical and economic points of view. While COVID-19 cases are close to their all-time highs, so
are equity prices, and a leading investment bank declared (on 2 December, 2021 after the Omicron outbreak in South Africa) that it was “optimistic about the possibility of a vibrant 2022.” When news of the variant hit in
late November, the markets were rocked by the prospect of yet another round of local mobility restrictions and
an interrupted return to normal international travel patterns, on top of the Biden Administration’s announced
release of 50 million barrels of crude from the US Strategic Petroleum Reserve. So far though, with OPEC
standing by its planned gradual return to normal production, oil prices have stabilized, albeit below where they
were in mid-November. Henry Hub prices, always at the mercy of the weather, responded predictably to a
warmer-than-normal early winter in the US, falling from US$6.60/MMBtu in early October to below
US$4.00/MMBtu by mid-December. In Europe and Asia, following a short reprieve at the start of the quarter,
piped natural gas prices have spiked again on concerns triggered by Russian troop buildups on the Ukraine
border and uncertainties surrounding the Nordstream 2 pipeline. Looking forward, OPEC and the U.S. Energy
Information Administration (EIA) in their last forecasts of the year both projected that 2022 oil demand would
be above what we saw in 2019. Although time will tell if those forecasts are realized and other events could
intervene, the response to new virus outbreaks is well-practiced and the trade-off between public health and
economic reality has tipped toward a cautiously optimistic view.
Project focusing on the distribution of the sports brand Nike understanding their various distribution channels and the selective paths that they choose for each country in order to benefit their business
Summary: Even in a time of high biopharma valuations, adopting an activist mentality adds rigor to capital allocation and strategic decision-making, improving not just returns to shareholders but long-term value creation. Therefore, biopharma management teams and boards of directors should proactively assess the “fitness” of their capital allocation strategies and their alignment with operational performance goals by taking an outsider’s view of the business even when times are good — and before a material stumble provides a compelling reason for an outsider to act. For more on this topic, go to http://www.ey.com/GL/en/Industries/Life-Sciences/EY-vital-signs-how-fit-is-your-capital-allocation-strategy.
The U.S. GAAP Financial Accounting Standards Board (FASB) Codification™ is fully effective for all entities. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification has created an entirely new topically organized system for all accountants to learn.
Learn more about Codification at:
http://ugaap.com/blog/?p=234#comments
Preview Deck | Finance and Accounting Outsourcing (FAO) Annual ReportEverest Group
The global multi-process FAO market continues to grow at a healthy rate of 11%. However, the growth was slower when compared to 2010. This is the not a sign of worry but a sign of movement towards the maturity of the FAO market. As the FAO market matures, the value proposition expands beyond cost and consequently, the FAO solution elements change too. FAO adoption is now not restricted to traditional markets but extended to under-penetrated markets as well. In 2012, Everest Group expects the FAO market to continue strong activity, resulting in a YoY growth of 10-15% in terms of ACV.
A Charitable Remainder Trust is a split interest trust consisting of an income interest, which is paid to the donor or other beneficiary during the term of the trust, and a remainder interest, which is paid to the designated charity. The purpose of this strategy is to harbor net investment income in a tax-exempt environment while leveling income over a longer period of time to keep MAGI below the threshold amount. CRTs are especially useful when there is a large capital gain that pushes income above the threshold amount.
EY Price Point: global oil and gas market outlookEY
As the last quarter of the second pandemic year draws to a close, we continue to see heightened contrast
between the medical and economic points of view. While COVID-19 cases are close to their all-time highs, so
are equity prices, and a leading investment bank declared (on 2 December, 2021 after the Omicron outbreak in South Africa) that it was “optimistic about the possibility of a vibrant 2022.” When news of the variant hit in
late November, the markets were rocked by the prospect of yet another round of local mobility restrictions and
an interrupted return to normal international travel patterns, on top of the Biden Administration’s announced
release of 50 million barrels of crude from the US Strategic Petroleum Reserve. So far though, with OPEC
standing by its planned gradual return to normal production, oil prices have stabilized, albeit below where they
were in mid-November. Henry Hub prices, always at the mercy of the weather, responded predictably to a
warmer-than-normal early winter in the US, falling from US$6.60/MMBtu in early October to below
US$4.00/MMBtu by mid-December. In Europe and Asia, following a short reprieve at the start of the quarter,
piped natural gas prices have spiked again on concerns triggered by Russian troop buildups on the Ukraine
border and uncertainties surrounding the Nordstream 2 pipeline. Looking forward, OPEC and the U.S. Energy
Information Administration (EIA) in their last forecasts of the year both projected that 2022 oil demand would
be above what we saw in 2019. Although time will tell if those forecasts are realized and other events could
intervene, the response to new virus outbreaks is well-practiced and the trade-off between public health and
economic reality has tipped toward a cautiously optimistic view.
Project focusing on the distribution of the sports brand Nike understanding their various distribution channels and the selective paths that they choose for each country in order to benefit their business
Summary: Even in a time of high biopharma valuations, adopting an activist mentality adds rigor to capital allocation and strategic decision-making, improving not just returns to shareholders but long-term value creation. Therefore, biopharma management teams and boards of directors should proactively assess the “fitness” of their capital allocation strategies and their alignment with operational performance goals by taking an outsider’s view of the business even when times are good — and before a material stumble provides a compelling reason for an outsider to act. For more on this topic, go to http://www.ey.com/GL/en/Industries/Life-Sciences/EY-vital-signs-how-fit-is-your-capital-allocation-strategy.
The U.S. GAAP Financial Accounting Standards Board (FASB) Codification™ is fully effective for all entities. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification has created an entirely new topically organized system for all accountants to learn.
Learn more about Codification at:
http://ugaap.com/blog/?p=234#comments
Preview Deck | Finance and Accounting Outsourcing (FAO) Annual ReportEverest Group
The global multi-process FAO market continues to grow at a healthy rate of 11%. However, the growth was slower when compared to 2010. This is the not a sign of worry but a sign of movement towards the maturity of the FAO market. As the FAO market matures, the value proposition expands beyond cost and consequently, the FAO solution elements change too. FAO adoption is now not restricted to traditional markets but extended to under-penetrated markets as well. In 2012, Everest Group expects the FAO market to continue strong activity, resulting in a YoY growth of 10-15% in terms of ACV.
A Charitable Remainder Trust is a split interest trust consisting of an income interest, which is paid to the donor or other beneficiary during the term of the trust, and a remainder interest, which is paid to the designated charity. The purpose of this strategy is to harbor net investment income in a tax-exempt environment while leveling income over a longer period of time to keep MAGI below the threshold amount. CRTs are especially useful when there is a large capital gain that pushes income above the threshold amount.
Intermediate Accounting Chapter 1 about Financial Reporting
and Accounting Standards
After studying this chapter, you should be able to:
Describe the growing importance of global financial markets and its relation to financial reporting.
Explain the objective of financial reporting.
Identify the major policy-setting bodies and their role in the standard-setting process.
Discuss the challenges facing financial reporting.
Students, digital devices and success - Andreas Schleicher - 27 May 2024..pptxEduSkills OECD
Andreas Schleicher presents at the OECD webinar ‘Digital devices in schools: detrimental distraction or secret to success?’ on 27 May 2024. The presentation was based on findings from PISA 2022 results and the webinar helped launch the PISA in Focus ‘Managing screen time: How to protect and equip students against distraction’ https://www.oecd-ilibrary.org/education/managing-screen-time_7c225af4-en and the OECD Education Policy Perspective ‘Students, digital devices and success’ can be found here - https://oe.cd/il/5yV
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
How to Split Bills in the Odoo 17 POS ModuleCeline George
Bills have a main role in point of sale procedure. It will help to track sales, handling payments and giving receipts to customers. Bill splitting also has an important role in POS. For example, If some friends come together for dinner and if they want to divide the bill then it is possible by POS bill splitting. This slide will show how to split bills in odoo 17 POS.
This is a presentation by Dada Robert in a Your Skill Boost masterclass organised by the Excellence Foundation for South Sudan (EFSS) on Saturday, the 25th and Sunday, the 26th of May 2024.
He discussed the concept of quality improvement, emphasizing its applicability to various aspects of life, including personal, project, and program improvements. He defined quality as doing the right thing at the right time in the right way to achieve the best possible results and discussed the concept of the "gap" between what we know and what we do, and how this gap represents the areas we need to improve. He explained the scientific approach to quality improvement, which involves systematic performance analysis, testing and learning, and implementing change ideas. He also highlighted the importance of client focus and a team approach to quality improvement.
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
The Art Pastor's Guide to Sabbath | Steve ThomasonSteve Thomason
What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
2. Primary Focus of Financial Accounting
• Providing financial information to various external users
– Investors
– Creditors
– Other external users
Investors
&
creditors
To predict the
future risk and
potential return of
investments or
loans
Before supplying
capital to
businesses
Use different kinds of information
LO1-1
Financial information is a
key component of that
information set
3. Financial Accounting
• Financial information is conveyed through financial
statements and related disclosure notes
– Balance sheet
– Income statement
– Statement of cash flows
– Statement of shareholders’ equity
Financial Reporting
• Refers to the process of providing financial information
to external users
LO1-1
5. The Economic Environment and Financial
Reporting
Capital markets provide a mechanism to help the
economy allocate resources efficiently
Initial market transactions involve issuance of stocks and
bonds by the corporation
– Corporations receive new cash
Secondary market transactions involve the transfer of
stocks and bonds between individuals and institutions
– Corporations receive no new cash
Corporations acquire capital from investors in exchange
for ownership interest and from creditors by borrowing
LO1-1
6. The Investment-Credit Decision—
A Cash Flow Perspective
Why do investors and creditors provide capital?
• They want to earn a fair return on the resources they
provide
• Shareholders receive cash from:
– Sale of the ownership shares of stock
– Periodic dividends
Key variables in investment decision
• Rate of return
• Uncertainty or risk
LO1-1
7. The Investment-Credit Decision—
A Cash Flow Perspective
Example calculation of rate of return:
If an investor provides a company with $10,000 cash by
purchasing stock at the end of 2015, receives $400 in
dividends from the company during 2016, and sells the
ownership interest (shares) at the end of 2016 for
$10,600.
• Investors and creditors like to invest in stocks or bonds
that provide a high expected rate of return
$400 dividends + $600 share price appreciation
$10,000 initial investment
10%
LO1-1
=
8. Concept Check √
Creecher purchased $200,000 worth of Troman stock , received four
quarterly dividends of $1,000 each, and sold the Troman shares for
$206,000 after one year. What is Creecher’s rate of return?
a. 1%.
b. 2.5%.
c. 5%.
d. 10%.
((4 x $1,000) + ($206,000 - $200,000)) ÷ $200,000 = 5%
9. The Investment-Credit Decision—
A Cash Flow Perspective
Example of uncertainty (risk): consider the following
two investment options. Which would you pick?
• Investing $10,000 in a savings account insured by
the U.S. government that will generate a 5% rate of
return
• Investing $10,000 in a profit-oriented company
Risk/Return tradeoff: Most investors would invest
in the profit-oriented company only if the
potential return is high enough.
LO1-1
10. The Investment-Credit Decision—
A Cash Flow Perspective
Primary objective of financial accounting
• Provided information should be useful for decision
making
• Information should help investors and creditors
evaluate
– Amounts
– Timing
– Uncertainty
LO1-1
11. Cash versus Accrual Accounting
Cash Basis Accounting
• Measurement of cash receipts and cash payments
from transactions related to providing goods and
service
• Difference is net operating cash flow
Accrual Basis Accounting
• Measurement of revenues and expenses, regardless of
when cash is received or paid
• Difference is net income or net loss
LO1-2
12. Example of Cash Basis Accounting LO1-2
Example of Accrual Accounting
13. Concept Check √
Which of the following is not an advantage of accrual accounting?
a. Spreads out the influence of one-time events that affect multiple
reporting periods.
b. Highlights cash effects of operations.
c. Captures long-run performance.
d. Recognizes assets and liabilities associated with receivables and
payables.
Cash-based accounting focuses on cash in and cash out,
and so highlights the cash effects of ongoing operations.
14. The Development of Financial Accounting
and Reporting Standards
LO1-3
Generally Accepted Accounting Principles (GAAP)
• GAAP is a set of both broad and specific guidelines that
companies should follow when measuring and
reporting the information in their financial statements
and related notes
• GAAP is set by standard setters but also emerges from
practice
• GAAP facilitates decision making by investors and
creditors by helping them understand information and
enhancing the comparability of that information
among companies
16. Historical Perspective and Standards
Securities and Exchange Commission (SEC)
• Created by Congress in response to the stock market
crash of 1929
– Goal: To restore investor confidence
• 1933 Securities Act
– Applies to initial offerings of securities (stocks and
bonds)
• 1934 Securities Exchange Act
– Applies to secondary market transactions
– Mandates reporting requirements for companies whose
securities are publicly traded
LO1-3
17. Early U.S. Standard Setting
Committee on Accounting Procedure (CAP) (1938 to 1959)
• First private sector standard-setting body
• Committee of the American Institute of Accountants(AIA)
• AIA: National professional organization for certified
professional public accountants
• AIA: Renamed as American Institute of Certified Public
Accountants (AICPA)
• Issued 51 Accounting Research Bulletins (ARBs)
Accounting Principles Board (APB) (1959 to 1973)
• Issued 31 Accounting Principles Board Opinions (APBOs),
various Interpretations, and four Statements
• Replaced by Financial Accounting Standards Board (FASB)
LO1-3
18. Financial Accounting Standards Board (FASB)
FASB created in 1973
• Established to set U.S. accounting standards
• Supported by Financial Accounting Foundation (FAF)
• Seven full-time members
Emerging Issues Task Force (EITF) created in 1984
• Identifies financial reporting issues and attempts to
resolve them without involving the FASB
– primarily addresses implementation issues
– speeding up the standard-setting process
• EITF rulings are ratified by the FASB and are considered
part of GAAP
Government Accounting Standards Board (GASB):
develop accounting standards for governmental units such
as states and cities.
LO1-3
19. Concept Check √
Accounting standards in the United States are currently set by:
a. The FASB.
b. The AICPA.
c. The EITF.
d. The NCAA.
Since 1973, the FASB has been the primary standard-setting
body in the United States.
20. Codification
FASB Accounting Standards Codification
Only source of authoritative nongovernmental U.S. GAAP
• Organizes the thousands of U.S. GAAP pronouncements
into roughly 90 accounting topics
• Also includes portions of SEC accounting guidance
• Accounting Standards Update (ASU): any new
standard issued by FASB
LO1-3
(www.fasb.org)
22. International Standard Setting
International Accounting Standards Committee (IASC)
• Formed in 1973 to develop global accounting standards
• Created a new standard-setting body called the
International Accounting Standards Board (IASB) (2001)
IASB:
• To develop a single set of high-quality, understandable,
and enforceable global accounting standards
• Issued and endorsed 41 International Accounting Standards
(IASs)
• Issued new standards of its own—called International
Financial Reporting Standards (IFRSs)
LO1-3
24. Efforts to Converge U.S. And International
Standards
LO1-3
U.S. GAAP
IFRS
Converged
Standards
25. Efforts to Converge U.S. And International
Standards
LO1-3
• September 2002: FASB and IASB signed the Norwalk
Agreement pledging to remove existing differences
between their standards and to coordinate their future
standard-setting agendas
• December 2007: The SEC signalled its view that IFRS
are of high quality by removing reconciliation
requirements
• April 2008: FASB and IASB agreed to accelerate the
convergence process and focus on a subset of key
convergence projects
26. Efforts to Converge U.S. And International
Standards
LO1-3
• November 2008: SEC issued a Roadmap that listed
necessary conditions to be achieved before the U.S. will
shift to requiring use of IFRS by public companies
• November 2011: The SEC issued two studies —
identified key differences between U.S. GAAP and IFRS
and analyzed how IFRS are applied globally
• July 2012: The SEC staff issued its Final Staff Report
• Concluded it is not feasible for the U.S. to adopt IFRS
due to:
– need for the U.S. to have stronger influence on the
standard-setting process
– high costs to companies of converting to IFRS
– the fact that many laws, regulations and private
contracts reference U.S. GAAP
28. Examples of Politics in Standard Setting
LO1-4
• Mid-1990’s—accounting for employee stock
options
• Accounting for business combinations
• Implementation of the fair value accounting
standard issued in 2007
29. Encouraging High-Quality Financial Reporting
LO1-5
Role of an Auditor
• Offer credibility to financial statements
• Express an opinion on the compliance of financial
statements with GAAP
• Licensed by states to provide audit services — Certified
public accountants (CPAs)
30. Financial Reporting Reform
LO1-5
Enron WorldCom Xerox Merck
Adelphia Communications
Accounting scandals
Sarbanes-Oxley Act
Increased the pressure on lawmakers to pass measures
that would restore credibility and investor confidence in
the financial reporting process
31. Sarbanes-Oxley Act
LO1-5
• Oversight board
• Corporate executive accountability
• Nonaudit services
• Retention of work papers
• Auditor rotation
• Conflicts of interest
• Hiring of auditor
• Internal control
32. • A principles-based, or objectives-oriented, approach to
standard-setting stresses professional judgment, as
opposed to following a list of rules
• Regardless, poor ethical values on the part of
management are at the heart of accounting abuses and
scandals
A Move Away from Rules-Based Standards?
vs.Principles-based Rules-based
Objectives-oriented
LO1-5
33. Ethics and Professionalism
LO1-5
Ethics deals with the ability to distinguish right from wrong
Codes of ethics are provided by:
• American Institute of Certified Public Accountants
(AICPA)
• Institute of Management Accountants (IMA)
• Institute of Internal Auditors (IIA)
34. Analytical Model for Ethical Decisions
LO1-5
Step 1. Determine the facts of the situation
Step 2. Identify the ethical issue and the stakeholders
Step 3. Identify the values related to the situation
Step 4. Specify the alternative courses of action
Step 5. Evaluate the courses of action specified in step 4 in
terms of their consistency with the values
identified in step 3
Step 6. Identify the consequences of each possible course
of action
Step 7. Make your decision and take any indicated action
35. Concept Check √
Which of the following is not one of the ways in which high-quality
accounting is encouraged by the U.S. financial reporting system?
a. Accounting standards encourage comparability.
b. Auditors assess whether financial statements are materially misstated.
c. Sarbanes-Oxley instituted reforms designed to improve the quality of
financial reporting.
d. Managers are required to use frameworks for ethical decision making
when deciding how to account for transactions.
Ethical frameworks can be very useful, but managers are not
required to use them.
36. The Conceptual Framework
LO1-6
• Described as an “Accounting Constitution”
• Provides an underlying foundation for accounting
standards
– Guide the selection of events to be accounted for
– Measurement of those events
– Means of summarizing and communicating them to
interested parties
• Provides structure and direction to financial accounting
and reporting
• Disseminated by FASB through Statements of Financial
Accounting Concepts (SFACs)
39. Hierarchy of Qualitative Characteristics of
Financial Information
LO1-7
Decision usefulness
Relevance Faithful Representation
Predictive
Value
Confirmatory
value
Materiality Completeness Neutrality
Free from
error
Comparability
(Consistency)
Verifiability Timeliness Understandability
Cost effectiveness constraint
(benefits exceed costs)
40. Concept Check √
Which of the following is not a component of relevance as defined in the
FASB’s conceptual framework?
a. Free from error.
b. Materiality.
c. Predictive value.
d. Confirmatory value.
Free from error is a component of faithful representation.
41. Concept Check √
Which of the following is not a component of faithful representation as
defined in the FASB’s conceptual framework?
a. Free from error.
b. Neutrality.
c. Understandability.
d. Completeness.
Understandability is an enhancing characteristic of decision
usefulness.
43. Elements of Financial Statements
• Assets
• Liabilities
• Equity (or net assets)
• Investments by owners
• Distributions to owners
• Comprehensive income
• Revenues
• Expenses
• Gains
• Losses
LO1-7
44. Underlying Assumptions
LO1-8
• The economic entity assumption presumes that
economic events can be identified specifically with
an economic entity.
• The going concern assumption anticipates that a
business entity will continue to operate indefinitely.
• The periodicity assumption allows the life of a
company to be divided into artificial time periods to
provide timely information.
• The monetary unit used in U.S. financial
statements is the U.S. dollar.
46. Recognition, Measurement, and Disclosure
Concepts
LO1-9
• Recognition refers to the process of admitting
information into the financial statements
• Measurement is the process of associating numerical
amounts with the elements
• Disclosure refers to the process of including additional
pertinent information in the financial statements and
accompanying notes
• General Recognition Criteria
– Definition, Measurability, Relevance, and Reliability
47. Revenue Recognition
LO1-9
Revenue: Inflows of assets or settlements of liabilities
resulting from providing a product or service to a customer
FASB recently issued ASU No. 2014-09, which requires that we
recognize revenue when goods or services are transferred to
customers for the amount the company expects to be entitled to
receive in exchange for those goods or services.
Previously, revenue recognition was guided by the realization
principle (two criteria)
– Earnings process is judged to be complete or virtually
complete
– Reasonable certainty as to the collectibility of the asset to
be received (usually cash)
48. Expense Recognition
LO1-9
Often matches revenues and expenses that arise from the
same transactions or other events
Four approaches:
• Based on an exact cause-and-effect relationship
• By associating an expense with the revenues
recognized in a specific time period
• By a systematic and rational allocation to specific time
periods
• In the period incurred, without regard to related
revenue
49. Measurement
LO1-9
GAAP currently employs a “mixed attribute” measurement
model. The five measurement attributes are:
Historical cost: original transaction value adjusted for
depreciation and amortization.
Net realizable value: the amount of cash into which an asset
is expected to be converted in the ordinary course of business
Current cost: the cost that would be incurred to purchase or
reproduce the asset.
Present (or discounted) value: calculated by removing the
time value of money from future cash flows
Fair value: the price that would be received to sell assets or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
50. Measurement
LO1-9
Historical Cost: Original transaction value
• Bases measurements on the amount given or received in
the exchange transactions
For assets:
– Value of what is given in exchange (usually cash) for the
asset at its initial acquisition
For liabilities:
– Current cash equivalent received in exchange for assuming
the liability
Long-lived, revenue-producing assets (equipment):
– Adjusted subsequent to its initial measurement by
recognizing depreciation or amortization
51. Measurement
LO1-9
Net Realizable Value
• Bases measurements on the amount of cash into which the
asset or liability will be converted in the ordinary course of
business
• Provides useful information to aid in the prediction of
future cash flows
Current Cost
• Some inventories are reported at their current replacement
cost
Present Value (SFAC 7)
• Bases measurement on future cash flows discounted for the
time value of money
52. Measurement
LO1-9
Fair Value (called current market value originally in SFAC 5 )
• Bases measurements on the price that would be received
to sell assets or transfer liabilities in an orderly market
transaction
Fair value can be measured using:
1. Market approach: Valuation based on market information
2. Income approach: Estimates future amounts and then
mathematically converts those amounts to a single
present value
3. Cost approach: Estimates the amount that would be
required to buy or construct an asset of similar quality and
condition
53. Concept Check √
Which of the following is not a measurement attribute defined in the FASB’s
conceptual framework?
a. Net realizable value.
b. Historical cost.
c. List price.
d. Fair value.
List price is not a measurement attribute. Rather, it is
whatever sales price a seller indicates (which might be
negotiable or subject to discounts).
55. Concept Check √
Which of the following is not true?
a. The fair value hierarchy reflects the subjectivity of inputs used to
compute fair values.
b. Level 1 of the fair value hierarchy refers to quoted market prices that
can be directly observed.
c. Level 3 of the fair value hierarchy refers to inputs that are not directly
observable, and so must be based on the entity’s own assumptions.
d. Level 3 inputs are preferred to Level 2, which are preferred to Level 1.
Level 1 inputs are most preferable because they are the least
subjective. Level 3 inputs are the least preferable because
they are based on the entity’s own assumptions.
56. Measurement
LO1-9
Fair Value Option
• GAAP gives a company the option to report some
financial assets and liabilities at fair value
– Provides companies a way to reduce volatility in
reported earnings without having to comply with
complex hedge accounting standards
– Helps to converge with international accounting
standards
57. Disclosure
LO1-9
Full-disclosure principle: requires that the financial reports
should include any information that could affect the
decisions made by external users
Such information can be disclosed in a variety of ways:
• Parenthetical comments or modifying comments
– Placed on the face of the financial statements
• Disclosure notes
– Convey additional insights
• Supplemental schedules and tables
– Report more detailed information than is shown in the
primary financial statements
59. Evolving GAAP
• Revenue/Expense Approach
– Emphasize principles for recognizing revenues and
expenses, which determines amount and timing of
recognition of assets and liabilities
• Asset/Liability Approach
– Recognize and measure the assets and liabilities that
exist at a balance sheet date
– Recognize and measure the revenues, expenses, gains
and losses needed to account for the changes in these
assets and liabilities from the previous measurement
date
LO1-10
60. International Financial Reporting Standards
LO1-11
Emphasizes that financial
statements should provide a
“true and fair representation”
of the company
Role of the conceptual framework
IFRS U.S GAAP
Primarily provides
guidance to standard
setters to help them
develop high-quality
standards
Guides standard setting,
but in addition it is supposed
to provide a basis for
practitioners to make
accounting judgments
Does not include an
explicit requirement, but
U.S. auditing standards
require this consideration