“accounting standards.” Address recognition, measurement and disclosure Three organizations development of GAAP for business enterprises: SEC, AICPA, FASB The SEC is the federal government agency that administers the securities laws of the US The AICPA is the national professional organization for practicing CPAs and has had a great impact on accounting principles over the years The Financial Accounting Standards Board (FASB) is one of three parts of the current accounting standard-setting mechanism in the US.
The other two are the Financial Accounting Foundation (FAF), and the Financial Accounting Standards Advisory Council (FASAC), is the current private-sector body that establishes GAAP for business entities The Accounting Principles Board (APB) issued 31 Opinions, entitled Accounting Principles Board Opinions many of which remain as GAAP, in whole or in part GAAP is defined in the Code as including FASB Statements and Interpretations, APB Opinions (that have not been superseded), and Accounting Research Bulletins (that have not been superseded) Four levels of authoritative support for the various pronouncements currently comprising GAAP: 1. FASB Technical Bulletins, and AICPA Industry Audit and Accounting guides The FASB’s Technical Bulletin series addresses questions about implementing the first category of GAAP, and issues not yet addressed by FASB Statements.
Required Disclosures in Periodic Reports: material correcting adjustments, material off-balance sheet transactions and relationships with unconsolidated entities, pro forma data Prohibited other services: bookkeeping information systems design and implementation appraisals or valuation services actuarial services internal audits management and human resources services broker/dealer and investment banking services legal or expert services unrelated to audit services and other services the board determines by rule to be impermissible Conceptual basis for FA General purpose external financial report (annual report) Components: Income Statement, Balance Sheet, Statement of Cash Flows, Supplementary Schedules, Footnote Disclosures, Auditor’s Opinion CAP: 51 pronouncements which are entitled Accounting Research Bulletins Formats for Presentation: the account format and the report format Classification of Accounts: assets in order of decreasing liquidity; liabilities in order of maturity; equity in order of permanence Statement of Cash Flow: SFAS #95 Cash equivalents: convertible into known fixed cash, original maturity is 3 months or less.
Statement of cash flow match the first item of BS: cash definition of funds – cash; cash and cash equivalent – (the same) SFAC #1 Objectives: provide cash flow, economic resources, financial performance, management responsibility information Purpose: assisting users in making predictions relevant to investing and credit-granting decisions than with assisting in the evaluation of past performance Target Audience: Decision makers SFAC #2 Qualitative Characteristics of Accounting Information Relevance: timeliness, predictive value, feedback value Reliability: representational faithfulness, verifiability, neutrality, Comparability: Consistency: Assumptions: 1.
Time period Principles: Historical cost Revenue recognition: when realized (conditions: goods/services provided, collectibility assured, expenses determined) Revenue: Matching Full disclosure: adequate disclosure Accounting Constraints Materiality: but no materiality threshold for illegal activities and related party transactions Industry peculiarity Conservatism Cost-Benefit SFAC #5 Recognition and Measurement in Financial Statements of Business Enterprises Full set of financial statements: 1. Cash Flows during the year (statement of cash flows) 5.
Investments by and Distributions to Owners during the year (statement of owner’s equity) Recognition & Measurement Criteria: Definition, measurability, relevance, reliability Balance Sheet Measurement basis: Values used: Historical cost (PPE), Market value (investment in marketable securities), Net realizable value (account receivable, inventory), Present value (non-current debt) Companies tend to report more current assets than current liabilities, so tend to move current liabilities into non-current liabilities.
Long-term liability disclosures: SFAS #47 Combined aggregate amount of maturities and sinking fund requirements for each of the five years. Capital structure disclosures: SFAS #129 Rights and privileges, number of shares issued, liquidation preference of preferred stock Others: aggregate or per-share amount of call/redemption price, and arrearage Income Statement All-inclusive, except: prior period adjustments, foreign currency translation adjustment, unrealized holding gain/loss, pension cost adjustments Accounting income: transaction based determination.
4.) If your shop is among the states participating in the 1987 multi-state Consent Judgments (click here for state names), could your center be held liable for any breach of the terms of those Court Orders?
1.) Have you performed or witnessed others performing any acts or practices you consider unlawful during your employment?
Structure of the Income Statement: top half (continuing operations); bottom half Operating income before miscellaneous is not required by GAAP Presentation Requirements Intraperiod Tax Discontinued operations (IS) Extraordinary items (IS) Cumulative effects of accounting principle changes (Retained Earnings Statement) Adjustment for retroactive accounting principle changes (Retained Earnings Statement) Prior period adjustments (Retained Earnings Statement) Unusual or Infrequent Income Items: APB Opinion #30. cost of restructuring Comprehensive Income SFAS #130 Sum of net income and OCI. Loss under equity method of accounting for Investments ( 8.
Represents most but not all of non-owner OE changes (doesn’t include those reported in Retained Earnings Statement) Three ways of disclosure: separate income statement (two statement approach); combined income and OCI statement (single statement approach); Statement of Shareholders’ Equity. Comprehensive Income: Includes all changes of OE except distributions to and investment by owners OCI components: Unrealized gain/loss on SAS Unrealized pension gain/loss Foreign currency translation adjustments Certain gains/losses from derivatives The accumulated balances of each individual component of OCI must be reported. Decreases in current assets (accounts receivable, inventory, prepaid assets, etc.) 9. Increases in Current Assets (accounts receivable, inventory, prepaid assets,etc.) 6.