Homework assignment Ch1-2
1.GAAP is the term used to indicate the whole body of FASB authoritative literature.
2.Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements.
Ans: False – All company that is claiming compliance with GAAP must follow all standards and interpretations especially disclosure requirements.
3.The primary governmental body that has influence over the FASB is the SEC.
4.The FASB has a government mandate and therefore does not have to follow due process in issuing a standard.
Ans: False – FASB relies on two basic premises: 1) the FASB should be responsive to the needs and viewpoints of the entire economic community not just the public accounting profession. 2) it should operate in full view of the public through a “due process” system that gives interested person ample opportunity to make their views known. To ensure the achievement of these goals, the FASB follows specific steps to develop a typical FASB statement of financial accounting standards.
(chapter 1 Intermediate Accounting, 14th Edition Financial Accounting and Accounting Standards page 25)
1.The objective of financial statements emphasizes a stewardship approach for reporting financial information.
2.The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners’ or stockholders’ equity.
Ans: False – the purpose of financial reporting is to provide information that is useful to equity investors, lenders and other
3.Because they are generally shorter, FASB interpretations are subject to less due process, compared to FASB standards.
Ans: False – FASB follows the same procedures for both interpretations and standards
4.The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.
1.GAAP stands for:
(a)Governmental auditing and accounting practices.
(b)Generally accepted attest principles.
(c)Government audit and attest policies.
(d)Generally accepted accounting principles.
2.Accounting standard-setters use the following process in establishing accounting standards:
(a)Research, exposure draft, discussion paper, standard.
(b)Discussion paper, research, exposure draft, standard.
(c)Research, preliminary views, discussion paper, standard.
(d)Research, discussion paper, exposure draft, standard.
3.GAAP is comprised of:
(a)FASB standards, interpretations, and concepts statements.
(b)FASB financial standards.
(c)FASB standards, interpretations, EITF consensuses, and accounting rules issued by FASB predecessor organizations.
(d)Any accounting guidance included in the FASB Codification.
4.The authoritative status of the conceptual framework is as follows.
(a)It is used when there is no standard or interpretation related to the reporting issues under consideration.
(b)It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue.
(c)It takes precedence over all other authoritative literature.
(d)It has no authoritative status.
5.The objective of financial reporting places most emphasis on:
(a)Reporting to capital providers.
(b)Reporting on stewardship....