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2. More Accountants Needed New accounting rules pose challenges for financial accounting and projections point to increased hiring of accounting graduates. 3. Capital Markets Companies need large amounts of capital for operations 4. Stock Exchange Companies may obtain capital by issuing capital stock... Capital Markets 5. Capital Markets Bank or by borrowing from lenders 6. External and Internal Users
7. Comparison of Financial and Managerial Accounting Sources of Authority Internal needs Managerial Accounting Financial Accounting GAAP 8. Time Frame of Reported Information Comparison of Financial and Managerial Accounting Present and future Managerial Accounting Primarily historical Financial Accounting 9. Scope Comparison of Financial and Managerial Accounting Total company Financial Accounting Individual departments, divisions, and total company Managerial Accounting 10. Type of Information Comparison of Financial and Managerial Accounting Primarily quantitative Sales $275,240 Cost 180,120 Gross mar. 95,120 Expenses 80,120 Net inc. $15,000 Financial Accounting Qualitative as well as quantitative Materials usage is unfavorable by $8,400. Managerial Accounting 11. Statement Format Comparison of Financial and Managerial Accounting Prescribed by GAAP; oriented toward investment and credit decisions Financial Accounting Determined by company; focused upon specific decisions being made Managerial Accounting 12. Decision Focus Comparison of Financial and Managerial Accounting External Financial Accounting Internal Managerial Accounting 13. The companys accountants prepare both the financial and the managerial accounting reports and the information comes from the same information system. Comparison of Financial and Managerial Accounting 14. Financial Reporting Financial reporting is the process of communicating financial accounting information about a company to external users. 15.
Financial Reporting Companies present at least three major financial statements: 16. Financial Reporting Astatement of changes in stockholders equityis also included by many companies. 17. Financial Reporting This statement summarizes the changes in each item of stockholders equity for a period. 18. Generally Accepted Accounting Principles (GAAP) GAAP are the guidelines, procedures, and practices that a company is required to use in recording and reporting the accounting information in its audited financial statements. They are like laws and are the rules that must be followed in financial reporting. 19. FASB Accounting Standards Codification Currently, there is no single document that includes all the accounting standards.However, the FASB has released itsFASB Accounting Standards Codificationfor verification by its constituents. When finalized, this Codification will be electronic and will integrate and topically organize U.S. accounting standards. 20.
Hierarchy of Sources of GAAP Continued CategoriesAuthoritative Sources 21.
Hierarchy of Sources of GAAP Continued Categories Authoritative Sources 22. Hierarchy of Sources of GAAP
Categories Authoritative Sources There are electronic databases such as the FASB Financial Accounting Research System (FARS) that include most accounting standards 23. FASB Accounting Standards Codification The Codification does not change GAAP. Instead, it reorganizes the many pronouncements on U.S. GAAP into about 90 accounting topics, organized in a consistent structure. 24. FASB Accounting Standards Codification
25. FASB Accounting Standards Codification The FASB expects to approve the Codification in 2009. At that time, the Codification will supercede all then-existing non-SEC standards. Once the Codification has been approved, the FASB will not issue separate new pronouncements. Instead, any new standards will be structured in a way to update the Codification. 26. Committee on Accounting Procedure (CAP)
27.
Reasons for Forming the APB The APB was comprised 17 to 21 members, selected primarily from the accounting profession. 28.
Criticisms of the APB 29.
Types of Pronouncements Issued by the FASB 30. Other Organizations Impacting GAAP
Continued 31. Other Organizations Impacting GAAP
Continued 32. Other Organizations Impacting GAAP
Continued 33. Other Organizations Impacting GAAP
Continued 34. Other Organizations Impacting GAAP
Continued 35. Other Organizations Impacting GAAP
36. Principles of the AICPA Code of Professional Conduct Responsibilities In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities. 37. Principles of the AICPA Code of Professional Conduct The Public Interest Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism. 38. Principles of the AICPA Code of Professional Conduct Integrity To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity. 39. Principles of the AICPA Code of Professional Conduct Objectivity and Independence A member should maintain objectivity and be free from conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance. 40. Principles of the AICPA Code of Professional Conduct Due Care A member should observe the professions technical and ethical standards, strive continually to improve competence and the quality of services, and discharge the professional responsibility to the best of the members ability. 41. Principles of the AICPA Code of Professional Conduct Scope and Nature of Service A member in public practice should observe the Principles of the CPC in determining the scope and nature of services to be provided. 42.
An Ethicists Basic Approaches to Moral Reasoning 43. IFRS and U.S. GAAP Many companies have become globalized. Currently, U.S. corporations are subject to the accounting standards established by the FASB, while foreign corporations are subject to international financial reporting standards (IFRS) established by the IASB or by accounting standards set by their national accounting standards board. These differences in accounting standards have led to differences among U.S. and foreign corporations financial statements. These differences, in turn, have made it difficult for investors and creditors to make valid comparisons across corporations and to make effective buy-sell-hold decisions in the U.S. and foreign capital markets. 44. IFRS and U.S. GAAP To resolve this issue, FASB and the IASB entered into an agreement (Norwalk) to develop high-quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting. To achieve this compatibility, the Boards agreed to work together to achieve short-term convergence on a number of individual differences between U.S. and international accounting standards. 45. C hapter 1 The End