Financial Statement Analysis, International Edition, 12e Charles H. Gibson
(Solutions Manual All Chapters, 100% Original Verified, A+ Grade)
Chapter 1
Introduction to Financial Reporting
TO THE NET
1. a. The Mission of the Financial Accounting Standard Board (In Part)
The mission of the Financial Accounting Standards Board (FASB) is to
establish and improve standards of financial accounting and reporting for
the guidance and education of the public, including issuers, auditors and
users of financial information.
Accounting standards are essential to the efficient functioning of the
economy because decisions about the allocation of resources rely
heavily on credible, concise, transparent and understandable financial
information. Financial information about the operations and financial
position of individual entities also is used by the public in making various
other kinds of decisions.
To accomplish its mission, the FASB acts to:
Improve the usefulness of financial reporting by focusing on the
primary characteristics of relevance and reliability and on the
qualities of comparability and constancy;
Keep standards current to reflect changes in methods of doing
business and changes in the economic environment;
Consider promptly any significant areas of deficiency in financial
reporting that might be improved through the standard-setting
process;
Promote the international convergence of accounting standards
concurrent with improving the quality of financial reporting; and
Improve the common understanding of the nature and purposes of
information contained in financial reports.
b. Financial Accounting Standards Advisory Council
An Overview
The Financial Accounting Standards Advisory Council, FASAC or “the
Council” for short, was formed in 1973 concurrent with the establishment
of the Financial Accounting Standards Board (the FASB or the Board).
, The primary function of FASAC is to advise the Board on issues related
to projects on the Board’s agenda, possible new agenda items, project
priorities, procedural matters that may require the attention of the FASB,
and other matters as requested by the chairman of the FASB. FASAC
meetings provide the Board with an opportunity to obtain and discuss the
views of a very diverse group of individuals from varied business and
professional backgrounds.
The members of FASAC are drawn from the ranks of CEOs, CFOs,
senior partners of public accounting firms, executive directors of
professional organizations, and senior members of the academic and
analyst communities.
Carrying Out the Mission
It is the job of the FASB to establish the “generally accepted accounting
principles,” or GAAP, to which public financial reporting by U.S.
corporations must conform and to keep those principles current.
In conducting its activities, the Board strives to carefully weight the views
of its users, preparers, and auditors of financial report. The Council
provides an important sounding board to help the FASB understand
what constituents are thinking about a wide range of issues.
FASAC’s role is not to reach a consensus or to vote on the issues that it
considers at its meetings. Rather, FASAC operates as a window
through which the Board can obtain and discuss the representative
views of the diverse groups the FASB affects. Thus, FASAC provides
the forum for two-way communication. While it is important to convene
the Council members as a group, that is so that the Board can hear the
individual views of those members and so that the members can hear
and respond to each other’s views.
Members of FASAC are urged to speak out publicly on matters before
the FASB and also to be supportive of the Board’s process, and the
principle of private-sector standard setting. Individual Council members
are not expected to agree with the Board’s decisions on all of the
technical aspects of the projects on the Board’s agenda, but it is
important that FASAC members support the institution and its due
process.
Structure of the Organization
FASAC is an operating arm of the Financial Accounting Foundation, an
organization that is independent of any other business or professional
organization. The Foundation is run by a 16-member Board of Trustees
who are leaders in the business, accounting, financial, government and
academic communities.
2
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, The Foundation selects the members of FASAC including the chairman
and broadly oversees its operations. The Council comprises 33
members who represent a broad cross section of the Board’s
constituency. They are appointed for a one-year term and are eligible to
be reappointed for three additional one-year terms.
The Process
The Council meets once a quarter at the FASB’s offices in Norwalk, Ct.
Like the FASB, FASAC is committed to following an open, orderly
process that is open to public observation. In addition to the Council
members, the members of the FASB, its director of research and
technical activities, several members of the FASB’s staff, and the chief
accountant of the SEC attend each meeting.
2. Each student will select a company and obtain a copy of their annual report,
10-K, and proxy. The annual report probably has material that is not in the
10-K.
3. a. The structure is designed to support those features that are regarded as
desirable in establishing the legitimacy of a standard setting
organization: its members are technically expert, represent the wider
community and are independent.
Review the Diagram at the website for an understanding of the structure.
b. The due process comprises six stages, with the trustees having the
opportunity to ensure compliance at various points throughout:
1. Setting the agenda
2. Planning the project
3. Developing and publishing the discussion paper
4. Developing and publishing the exposure draft
5. Developing and publishing the standard
6. After the standard is issued
4. a. The mission of the PCAOB is to oversee the auditors of public
companies in order to protect the interest of investors and further the
public interest in the preparation of informative, fair, and independent
audit reports.
b. The PCAOB’s rule making process results in the adoption of rules that
are then submitted to the Securities and Exchange Commission for
approval.
3
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, 5. a. Its mission is to provide members with the resources, information, and
leadership that enable them to provide services in the highest
professional manner to benefit the public as well as employers and
clients.
b. The American Institute of Certified Public Accountants and its
predecessors have a history dating back to 1887, when the American
Association of Public Accountants was formed. In 1916, the American
Association was succeeded by the Institute of Public Accountants, at
which there was a membership of 1,150. The name was changed to the
American Institute of Accountants in 1917 and remained so until 1957,
when the name was again changed to the American Institute of Certified
Public Accountants. The American Society of Certified Public
Accountants was formed in 1921 and acted as a federation of state
societies. The Society was merged into the Institute in 1936 and, at that
time, the Institute agreed to restrict its future members to CPAs.
6. a. This will give you the symbol of the company that you selected and the
stock price.
b. This results in a description of Airbus.
4
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
(Solutions Manual All Chapters, 100% Original Verified, A+ Grade)
Chapter 1
Introduction to Financial Reporting
TO THE NET
1. a. The Mission of the Financial Accounting Standard Board (In Part)
The mission of the Financial Accounting Standards Board (FASB) is to
establish and improve standards of financial accounting and reporting for
the guidance and education of the public, including issuers, auditors and
users of financial information.
Accounting standards are essential to the efficient functioning of the
economy because decisions about the allocation of resources rely
heavily on credible, concise, transparent and understandable financial
information. Financial information about the operations and financial
position of individual entities also is used by the public in making various
other kinds of decisions.
To accomplish its mission, the FASB acts to:
Improve the usefulness of financial reporting by focusing on the
primary characteristics of relevance and reliability and on the
qualities of comparability and constancy;
Keep standards current to reflect changes in methods of doing
business and changes in the economic environment;
Consider promptly any significant areas of deficiency in financial
reporting that might be improved through the standard-setting
process;
Promote the international convergence of accounting standards
concurrent with improving the quality of financial reporting; and
Improve the common understanding of the nature and purposes of
information contained in financial reports.
b. Financial Accounting Standards Advisory Council
An Overview
The Financial Accounting Standards Advisory Council, FASAC or “the
Council” for short, was formed in 1973 concurrent with the establishment
of the Financial Accounting Standards Board (the FASB or the Board).
, The primary function of FASAC is to advise the Board on issues related
to projects on the Board’s agenda, possible new agenda items, project
priorities, procedural matters that may require the attention of the FASB,
and other matters as requested by the chairman of the FASB. FASAC
meetings provide the Board with an opportunity to obtain and discuss the
views of a very diverse group of individuals from varied business and
professional backgrounds.
The members of FASAC are drawn from the ranks of CEOs, CFOs,
senior partners of public accounting firms, executive directors of
professional organizations, and senior members of the academic and
analyst communities.
Carrying Out the Mission
It is the job of the FASB to establish the “generally accepted accounting
principles,” or GAAP, to which public financial reporting by U.S.
corporations must conform and to keep those principles current.
In conducting its activities, the Board strives to carefully weight the views
of its users, preparers, and auditors of financial report. The Council
provides an important sounding board to help the FASB understand
what constituents are thinking about a wide range of issues.
FASAC’s role is not to reach a consensus or to vote on the issues that it
considers at its meetings. Rather, FASAC operates as a window
through which the Board can obtain and discuss the representative
views of the diverse groups the FASB affects. Thus, FASAC provides
the forum for two-way communication. While it is important to convene
the Council members as a group, that is so that the Board can hear the
individual views of those members and so that the members can hear
and respond to each other’s views.
Members of FASAC are urged to speak out publicly on matters before
the FASB and also to be supportive of the Board’s process, and the
principle of private-sector standard setting. Individual Council members
are not expected to agree with the Board’s decisions on all of the
technical aspects of the projects on the Board’s agenda, but it is
important that FASAC members support the institution and its due
process.
Structure of the Organization
FASAC is an operating arm of the Financial Accounting Foundation, an
organization that is independent of any other business or professional
organization. The Foundation is run by a 16-member Board of Trustees
who are leaders in the business, accounting, financial, government and
academic communities.
2
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, The Foundation selects the members of FASAC including the chairman
and broadly oversees its operations. The Council comprises 33
members who represent a broad cross section of the Board’s
constituency. They are appointed for a one-year term and are eligible to
be reappointed for three additional one-year terms.
The Process
The Council meets once a quarter at the FASB’s offices in Norwalk, Ct.
Like the FASB, FASAC is committed to following an open, orderly
process that is open to public observation. In addition to the Council
members, the members of the FASB, its director of research and
technical activities, several members of the FASB’s staff, and the chief
accountant of the SEC attend each meeting.
2. Each student will select a company and obtain a copy of their annual report,
10-K, and proxy. The annual report probably has material that is not in the
10-K.
3. a. The structure is designed to support those features that are regarded as
desirable in establishing the legitimacy of a standard setting
organization: its members are technically expert, represent the wider
community and are independent.
Review the Diagram at the website for an understanding of the structure.
b. The due process comprises six stages, with the trustees having the
opportunity to ensure compliance at various points throughout:
1. Setting the agenda
2. Planning the project
3. Developing and publishing the discussion paper
4. Developing and publishing the exposure draft
5. Developing and publishing the standard
6. After the standard is issued
4. a. The mission of the PCAOB is to oversee the auditors of public
companies in order to protect the interest of investors and further the
public interest in the preparation of informative, fair, and independent
audit reports.
b. The PCAOB’s rule making process results in the adoption of rules that
are then submitted to the Securities and Exchange Commission for
approval.
3
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, 5. a. Its mission is to provide members with the resources, information, and
leadership that enable them to provide services in the highest
professional manner to benefit the public as well as employers and
clients.
b. The American Institute of Certified Public Accountants and its
predecessors have a history dating back to 1887, when the American
Association of Public Accountants was formed. In 1916, the American
Association was succeeded by the Institute of Public Accountants, at
which there was a membership of 1,150. The name was changed to the
American Institute of Accountants in 1917 and remained so until 1957,
when the name was again changed to the American Institute of Certified
Public Accountants. The American Society of Certified Public
Accountants was formed in 1921 and acted as a federation of state
societies. The Society was merged into the Institute in 1936 and, at that
time, the Institute agreed to restrict its future members to CPAs.
6. a. This will give you the symbol of the company that you selected and the
stock price.
b. This results in a description of Airbus.
4
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
