Kế toán, kiểm toán - Chapter14: Accounting principles and reporting standards

1-*McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Accounting Principles and Reporting Standards Section 1: Generally Accepted Accounting PrinciplesChapter14Section ObjectivesUnderstand the process used to develop generally accepted accounting principles.Identify the major standards-setting bodies and their roles in the standard-setting process.Describe the users and uses of financial reports.Generally Accepted Accounting Principles (GAAP) Ensure that financial statements are meaningful and  useful. Are used whether the business is large or small. Allow financial statements of different companies to  be compared. Allow a company to compare its own financial  statements from period to period. Public sector government represented by SECIn the United States, accounting principles are developed through a cooperative effort between the public sector and private sector. Private sector business represented by FASBObjective 1Understand the process used to develop generally accepted accounting principlesSecurities and Exchange Commission Regulates the financial reporting of publicly held  corporations. Determines the form and content of accounting reports  filed by companies under its jurisdiction. Has authority to define accounting terms and to prescribe  accounting principles. Lets the accounting profession develop principles and  standards, but has the final authority.Created by the Sarbanes-Oxley Act.Is a private sector, non-profit corporation whose purpose is to oversee the CPA firms auditing publicly-held companies.Has the power to set auditing, quality control, ethics, independence and other standards for CPA firms engaged in auditing publicly-held companies.The Public Company Accounting Oversight BoardFinancial Accounting Standards Board Seven member board — each having distinguished  accounting backgrounds — who are full-time employees. Responsible for developing financial accounting  and reporting standards and principles. Develops and issues Statements of Financial Accounting  Standards that govern the preparation of financial reports  by nongovernmental agencies. Has issued about 150 standards that the SEC recognizes  as authoritative.American Institute of Certified Public Accountants (AICPA) In the past, GAAP were developed by AICPA  committee. In 1973 the AICPA and other organizations formed  the FASB. The AICPA requires its members to confirm that  audited companies follow the FASB Statements of  Financial Accounting Standards. Federal and State Agencies Require detailed systems of accounting for public  utilities including railroad and electric power  industries. Issue income tax rules for companies (IRS).Some companies adopt tax accounting rules for financial records, provided the rules don’t conflict with GAAP.Other Organizations AAA (American Accounting Association) NYSE (New York Stock Exchange) IASB (International Accounting Standards Board)The FASB has concluded that financial reporting rules should focus on providing information to current and potential investors and creditors in making investment and credit decisions.The focus is not ontax authoritiesmanagementregulatory agenciesObjective 3Describe the Users and Uses of Financial ReportsAccounting Principlesand Reporting Standards Section 2: The FASB’s Conceptual Framework of AccountingChapter14Section ObjectivesIdentify and explain the qualitative characteristics of accounting information.Describe and explain the basic assumptions about accounting reports.Explain and apply the basic principles of accounting.Describe and apply the modifying constraints on accounting principles.FASB’s conceptual framework of accounting can be divided into four categories: Qualitative Characteristics Basic Assumptions Basic Accounting Principles Modifying ConstraintsQualitative CharacteristicsUsefulnessUnderstandabilityRelevanceReliabilityNeutralityComparabilityConsistencyObjective 4Identify and explain the qualitative characteristics of accounting informationUnderlying Assumptions Separate Economic Entity Going Concern Monetary Unit Periodicity of IncomeObjective 5Describe and explain the basic assumptions about accounting reportsGeneral PrinciplesHistorical Cost BasisRevenue RecognitionMatchingFull DisclosureObjective 6Explain and apply the basic principles of accountingModifying Constraints Materiality Cost-Benefit Test Conservatism Industry PracticeObjective 7Describe and apply the modifying constraints on accounting principles