1. Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control a companys operations.
2. Financial statements are the principal means through which a company communicates its financial information to those outside it.
3. Users of financial reports of a company use the information provided by these reports to make their capital allocation decisions.
4. An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit.
5. The objective of financial reporting is to report the plans made by a company to improve the productivity of its employees.
6. Investors are interested in financial reporting because it provides information that is useful for making decisions.
7. Users of financial accounting statements have both coinciding and conflicting needs for information of various types.
8. The Securities and Exchange Commission appointed the Committee on Accounting Procedure.
9. The passage of a new FASB Accounting Standards Update requires the support of five of the seven board members.
10. Statements of Financial Accounting Concepts set forth fundamental objectives and concepts that are used by the FASB in developing future standards of financial accounting and reporting.
11. The AICPA created the Accounting Principles Board in 1959.
12. The FASBs Codification creates a new set of GAAP.
13. The AICPAs Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles.
14. GAAP is a product of careful logic or empirical findings and is not influenced by political action.
15. The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes auditing and independence standards and rules.
16. The expectations gap is due to the difference between what the public thinks accountants should do and what accountants think they can do.
17. Financial reports in the early 21st century did not provide any information about a companys soft assets (intangibles).
18. Accounting standards are now less likely to require the recording or disclosure of fair value information.
19. U.S. companies that list overseas are required to use International Financial Reporting Standards, issued by the International Accounting Standards Board.
20. Ethical issues in financial accounting are governed by the AICPA.