2014 FASB Update Intermediate Accounting (15th Edition) Edit edition

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Solutions for Chapter 1…

Financial Accounting Standards Board (FASB):

FASB is the Financial Accounting Standards Board that is a standard setting body. The primary purpose of FASB is to establish and improve generally accepted accounting principles in the country United States.

Generally accepted Accounting Principles (GAAP):

Generally accepted accounting principles are a set of guidelines, standards and procedures that the company must comply in preparation of financial statements. It includes both authoritative standards and accounting principles for recording and reporting of financial information.

(1)

The FASB codification organizes the existing GAAP by accounting topic regardless of its source. These codified standards are considered to be GAAP and are authoritative.

GAAP is the term used to indicate the whole body of FASB authoritative literature.

Hence, this statement is .

(2)

Any company claiming compliance with GAAP must also follow the disclosure requirements as mentioned in the financial accounting standard.

Hence, this statement is .

(3)

SEC is a federal agency that has the broad power to prescribe the accounting standards to be employed in whatever details it desires, by the companies that are within the jurisdiction of SEC

Hence, this statement is .

(4)

In establishing any financial accounting standard, the FASB primarily relies on two basic premises

1. The FASB should take due care to the needs and various viewpoints of the entire economic community, not just the profession of accountancy.

2. FASB should operate through a system called “ Due process” system which gives all the interested persons an ample opportunity to express their views on the proposed financial accounting standard

Hence, this statement is .