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Formation, composition and the responsibility of international accounting standards
The need for international accounting standards
The need for international accounting standards
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Discussion of the Changes Proposed by the International Accounting Standards Board and How These Changes Will Affect the United States’ General Accepted Accounting Practices The changes that are proposed by the International Accounting Standards Board (IASB) will affect the United States’ Generally Accepted Accounting Principles (GAAP). These changes may have the most significant effects in the areas of revenue recognition, leases, and financial instruments ( ). The proposed changes under the IASB call for one standard be used in revenue recognition. This standard would apply to all industries and transactions. So under such a standard, no specific revenue for transactions and industry will exist. The specific revenue recognition will be replaced with a principle founded approach for determining revenue recognition. This new standard by the IASB could influence every entity’s daily accounting as well as the manner business is conducted in contracts with clients and/or customers. The standard would make it totally apparent when revenue is recognized and why (Journal of Accountancy July 24, 2010). The main aim of the proposed standard is that a company should recognize revenue when it transfers goods or services to a customer in the amount of consideration the company expects to receive from the customer or client (Journal of Accountancy July 24, 2010). There are specific areas that will receive the most signifiant changes. For instance, revenue would be recognized only from the transfer of goods or services to a customer. This alteration would affect some long-term contracts. Percentage-of -completion revenue recognition could be permitted but solely when the customer or client owns the work-in... ... middle of paper ... ...rement would be reflected on a company’s balance sheet. The balance sheet will mirror the fair value carrying the amount while amortized cost information is shown in profit or loss. The difference between the fair value and amortized cost data will be identified in other comprehensive income (Snapshot: Financial Instruments). The changes proposed by the International Accounting Standards Board (IASB) will have a significant affect on the General Accepted Accounting Practices of the United States. Most profoundly, the affect will be felt in the areas of revenue recognition, leases, and financial instruments. These changes are designed to make more consistent accounting procedures around the globe so that investors and other interested parties have a truer understanding of the financial health and stability of companies in which they have any type of investment.
B) assets are generally listed on the balance sheet at their historical cost, not their current value.
According to the FASB Accounting Standards Codification, goodwill is “An asset representing the future economic benefits arising from other assets acquired in a business combination or an acquisition by a not for profit entity...” (glossary). Goodwill is measured by the premium price we pay for a company; we calculate premium price by subtracting the amount we paid by the estimated price (Fair value) of the company and if we paid more goodwill is created. Goodwill is an intangible asset so it has an indefinite life because it cannot lose value over a specific amount of time. We test for impairment to find out if goodwill has kept its value or if it has declined and we test for impairment on an annual basis. However, goodwill in FASB Accounting Standards
ASC 606 is a new revenue recognition principle that provide standards for recognizing revenue from contracts that provide goods and or services to a consumer. EY identifies the following five steps to apply the new principle: "Identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, Allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the entity satisfies a performance obligation.("Technical")" Section 451 of the IRC generally requires taxable income to be reported by completing the all-events test and the amount is reasonably determinable ("26"). This can create a variation from the financial statements and the taxable income amount. To further study
The goal of the Codification is to simplify the organization of thousands of authoritative U.S. accounting pronouncements issued by multiple standard-setters. To achieve this goal, the FASB initiated a project to integrate and topically organize all relevant accounting pronouncements issued by the U.S. standard-setters including those of the FASB, the American Institute of Certified Public Accountants (AICPA), and the Emerging Issues Task Force (EITF)
FASB Codification. Digital image. FASB Accounting Standards Codification Professional View. FASB. Web. 28 Nov. 2010. .
Governmental Accounting Standards Board (GASB) is the independent organization that improves and establishes the accounting standards for the United States and local governments. It was established in 1984 by an agreement by the Financial Accounting Foundation and ten national associations of local governments. The mission of the GASB is “to establish and improve standards of the state and local governmental accounting and financial reporting that will result in useful information for users of financial reports, and to guide and educate the public and users of those financial reports (GASB 2014).” Their four core values are: independence, integrity, objectivity, and transparency. The GASB is not a governmental entity, and it is a component of the Financial Accounting Foundation which is a private sector not for profit entity. The GASB standards are not federal laws or regulations, and the GASB does not enforcement authority. However, the standards are enforceable through the laws of the individual states and the auditing process. The process of a standard being set is by due process, and the Governmental Accounting Standards Advisory Council consists of thirty members that are appointed by the Financial Accounting Foundation Trustees. Th...
Under the accrual basis of accounting, expenses are matched with revenues on the income statement when the expenses expire or title has transferred to the buyer, rather than at the time when expenses are paid. The balance sheet is also affected at the time of the expense by a decrease in Cash (if the expense was paid at the time the expense was incurred), an increase in Accounts Payable (if the expense will be paid in the future), or a decrease in Prepaid Expenses (if the expense was paid in
In the world of international finance there are two major accounting systems; GAAP, which stands for Generally Accepted Accounting Principles, and IFRS, which stands for International Financial Reporting Standards. The United States prefers GAAP while the European market, as well as many other countries, prefers IFRS. By 2015 the Securities Exchange Commission is anticipating a total transfer to IFRS in the United States. Though the differences between GAAP and IFRS are few, they could affect accuracy of financial reporting throughout the world. It is important to understand the differences and similarities between both GAAP and IFRS if one is to globalize ones market (Logue).
The purpose of this article is to explain one important accounting principle which is the revenue recognition principle. As a reporter, this will help to analyze companies charged by the SEC for accounting schemes related to revenues and will allow you to ask more meaningful interview questions.
In a significant step towards convergence, the FASB and IASB (“the Boards”) issued the Exposure Draft, Revenue from Contracts with Customers in 2010. The goal was to create a single joint revenue recognition standard that companies could apply consistently across industries and capital markets thereby improve financial reporting. The Boards highlighted a number of improvements in the proposed standard - removing inconsistencies, improving comparability, requiring enhanced disclosures and clarifying the accounting for contract costs. Instead of focusing on “realized/realizable” and “earned” the Exposure D...
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.
The purpose of this document is to describe the nature, purpose and scope of accounting and it deliberately explains the details of each category in accounting. Accounting involves in preparing financial documents of an entity by analyzing, verifying, and reporting this records. It emphasizes its major characteristic role in field of banking and finance, with a mixture of supportive sub topics.
GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a company's financial statements. And even though variations might exist, one can make realistically confident conclusions when comparing one company to another, or when comparing one company's financial statistics to the statistics for the industry as a whole. Over the years the generally accepted accounting principles have become more multifaceted because financial transactions have become more intricate (Accounting Principles, 2011).
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.