Overview of Accounting Research: FASB Codification & IFRS

Flashcards covering key concepts from Chapter 1: Overview of Accounting Research, including types of research, timing, standard setters, and historical context of accounting guidance.

What are the two main types of accounting research commonly performed?

Applied research and academic research.

Which type of accounting research is the primary focus of this course?

Applied research, also known as technical accounting research.

How do research responsibilities typically change as an accountant progresses in their career?

Entry-level accountants perform some research, while managers, senior managers, partners, and corporate accounting policy teams have a major focus on research.

What percentage of scores on certain sections of the CPA exam are accounted for by task-based simulations requiring research and writing skills?

Approximately 50%.

Name at least four valuable skills learned in this course that employers value and can be added to a resume.

Research skills using the Codification, effective writing skills, understanding the research process and judgment, and oral communication skills.

In what diverse environments is accounting research performed?

Public companies, nonpublic/private companies, international companies, governmental entities, and tax reporting.

Who are the typical parties that perform accounting research?

Corporate accountants, auditors, regulators, investors, and attorneys.

When is the ideal time to perform accounting research for a transaction, and why?

Ideally, before a transaction occurs. This allows management to understand impacts on earnings, consider financial statement acceptability, review with auditors, and comply with documentation requirements.

What are some circumstances when accounting research might be performed at the time a transaction is executed or after financial statement issuance?

At execution: limited resources, new information, confidential/time-sensitive transactions, or changes in contract terms. After issuance: regulator or investor inquiries, or litigation.

Who are the accounting standard setters for U.S. public companies?

FASB and SEC.

Who is the auditing standard setter for U.S. public companies?

PCAOB.

Which boards set accounting and auditing standards for U.S. private companies?

FASB (consulting the PCC) for accounting, and AICPA for auditing.

Who sets accounting standards for state and local governmental entities?

GASB (Governmental Accounting Standards Board).

What was the initial standard-setting body formed by the AICPA in 1939, and what guidance did it issue?

The Committee on Accounting Procedure (CAP), which issued Accounting Research Bulletins (ARBs).

When was the Financial Accounting Standards Board (FASB) established, and what organization oversees it?

The FASB was established in 1973 and is overseen by the Financial Accounting Foundation (FAF).

What historical event led to the recognition of the need for accounting guidance in the U.S. and the creation of the SEC?

The Great Depression and the stock market crash of 1929, leading to the Securities Exchange Acts of 1933/34.

To whom did the SEC initially delegate its authority for setting accounting standards, and to whom is it currently delegated?

Initially delegated to the AICPA (which formed the CAP and APB), and since 1973, to the FASB.

What is the SEC best known for today, besides setting certain disclosure standards?

Its enforcement activities.

What were the main criticisms of early standard-setting boards like the CAP and APB that led to their replacement by the FASB?

Lack of a conceptual framework, part-time board members, and lack of independence.

How is the FASB funded?

Through accounting support fees assessed to public companies, which are collected for the FASB by the PCAOB based on market capitalization.

What is the significance of the FASB Accounting Standards Codification, established in 2009?

It is the sole source of authoritative GAAP for nongovernmental entities, and all guidance within it has equal authority.

Who ultimately has the authority to decide who will be the next U.S. accounting standard-setter, potentially the IASB?

The SEC.

How is a 'public entity' defined in the Codification?

A business or not-for-profit entity that is required to file financial statements with the SEC, issues publicly-traded debt or equity, or provides financial statements for the purpose of issuing any class of securities in a public market.

What organization did the Financial Accounting Foundation (FAF) create in 2012 to address accounting complexity for private companies?

The Private Company Council (PCC).

What non-GAAP framework for private companies was introduced by the AICPA in 2013 to streamline financial statement preparation where a clean audit opinion is not required?

The Financial Reporting Framework for Small and Medium-Sized Entities (FRF for SMEs), also known as an 'other comprehensive basis of accounting' (OCBOA).