RULES OR FEEL !FR&A

RULES OR FEEL !FR&A

Contents

1. Objectives
2. Assumptions
3. Principles
4. constraints

As Eric Burns (American author), said “It's not enough to create magic. You have to create a price for magic too. You have to create rules.”

Financial Accounting Standards Board (FASB)

The Securities and Exchange Commission (SEC) design the FASB as the organization responsible for setting accounting standards for public companies in the U.S.

It was created in 1973 replacing the Committee on Accounting Procedure (CAP) and the Accounting Principles Board (APB) of the American Institute of Certified Public Accountants (AICPA).

The FASB is not a governmental body.

The FASB is part of a structure that is independent of all other business and professional organizations.

Before the present structure was created, financial accounting and reporting standards were established first by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants (1936–59) and then by the Accounting Principles Board, also a part of the AICPA (1959–73).

Pronouncements of those bodies remain in force unless amended or superseded by the FASB.

The board consists of seven full-time members.

All members are selected by the Financial Accounting Foundation

They are appointed for a five-year term and are eligible for one additional five-year term.

In additional to the full-time members, there are approximately 68 staff members *

In 1984, the FASB formed the Emerging Issues Task Force (EITF).

Generally Accepted Accounting Principles (US GAAP)

In the United States, Generally Accepted Accounting Principles are accounting rules used to prepare, present and report financial statements .

The term is generally apply to accountancy and not only the United States.

The Securities and Exchange Commission requires that US GAAP be followed in financial reporting by publicly traded companies.

The Financial Accounting Standards Board (FASB) establishes generally accepted accounting principles for public and private companies, as well as for non-profit organizations.

The Governmental Accounting Standards Board (GASB) determines the GAAP which operate using a set of assumptions, principles, and constraints, different from those of standard private-sector GAAP.

The US GAAP provisions differ somewhat from International Financial Reporting Standards (IFRS).

The SEC Chairman Christopher Cox set out a timetable for all U.S. companies to drop GAAP by 2016, (with the largest companies switching to IFRS as early as 2009.)

The SEC expressed their aim to fully adopt International Financial Reporting Standards in the U.S. by 2014.

Objectives (US GAAP)

• Useful to present to potential investors and creditors and other users in making rational investment, and other financial decisions.
• Helpful in improving the performance of the business.
• Useful in maintaining records.

International Accounting Standards Board

The IASB was founded on April 1, 2001 as the successor to the International Accounting Standards Committee (IASC).

It is responsible for developing International Financial Reporting Standards (the new name for International Accounting Standards issued after 2001)

The IASB has 14 Board members (12 are full time members and 2 are part time) each with one vote.

They are selected as a group of experts with a mix of experience of standard-setting and academic work.

The IFRS Interpretations Committee has 14 members. Its provide timely guidance on issues that arise .

International Financial Reporting Standards (IFRS – IGAAP)

Designed as a common global language

They are progressively replacing the many different national accounting standards.

They are sometimes still called by the original name of International Accounting Standards (IAS).

IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC).

On April 1, 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards.

The IASB has continued to develop standards calling the new standards IFRS.

Three assumptions in IFRS

Assumptions IFRS

1. Going concern: assumes that the business will be in operation indefinitely.
2. measuring unit assumption: accountants consider changes in the purchasing power of the functional currency
3. Units of purchasing power: the total rejection of the stable measuring unit assumption at all levels of inflation and deflation.

Abstract

• IFRS are issued by the IASB
• IAS were issued by the IASC, till 2001
• IFRIC are standards interpretations issued by the International Financial Reporting Interpretations Committee
• SIC were standards interpretations issued by the Standards Interpretations Committee, till 2001
• All the standards and interpretations are adopted in the form of Regulation.