Acctg 5110 Exam 1 Latest Questions
With Guaranteed Pass Solutions.
Information asymmetry, its effects, and how it relates to financial reporting: - Answer o Information
asymmetry describes situations where one party has better information than another
o Information asymmetry prevents efficient capital allocation, which is critical for growth in an economy
o Financial reporting can minimize information asymmetry
Means of financial reporting
o Examples include: - Answer The annual report
o Financial statements
o Notes to the financial statements
o Management's discussion and analysis
-Other filings with the SEC
-Filings with other regulatory agencies
-Conference calls
-Press releases
Importance of accounting standards - Answer Accounting standards facilitate clear and consistent
financial reporting
•Companies tend not to disclose detailed information unless required.
-- Voluntary disclosure is selective
•Without a single set of generally accepted accounting standards, each company would have to
negotiate accounting procedures with the parties with whom they transact
-- Users of financial statements would have to be familiar with countless sets of accounting policies of
varying quality
-- It would be difficult if not impossible to adequately compare companies
*Accounting standard setters in the US (SEC/FASB) and abroad (IASB)
, SEC - Answer -The SEC, created in 1934 to enforce securities law, was given power to prescribe
accounting standards to be followed by companies in its jurisdiction
-The SEC relies on the FASB to develop accounting standards
• However, it is the SEC that enforces their adherence
-The IASB sets standards for international use
*Accounting standard setters in the US (SEC/FASB) and abroad (IASB)
FASB - Answer -Financial Accounting Standards Board
-Created in 1973 with seven full-time board members from a variety of backgrounds
-Functions "independent" of political pressure
-Its standards are compiled in the Accounting Standards Codification (ASC)
*Accounting standard setters in the US (SEC/FASB) and abroad (IASB)
IASB - Answer -The IASB was created in 2001 with the goal of developing a single set of accounting
standards that can be used worldwide
Future of international standards for the US
(can't find this one) - Answer ?
*Objectives of accounting standards (SFAC1) - Answer To provide information to users (i.e., investors,
creditors, and others) that
• is useful in making investment, credit, and other decisions
• helps assess the amounts, timing, and uncertainty of future net cash inflows
• portrays the company's resources, obligations, and how effectively the company has used its resources
*Framework for standard setting (e.g., relevant vs. representationally faithful) - Answer The FASB sets
accounting standards within a conceptual framework that guides its decisions
With Guaranteed Pass Solutions.
Information asymmetry, its effects, and how it relates to financial reporting: - Answer o Information
asymmetry describes situations where one party has better information than another
o Information asymmetry prevents efficient capital allocation, which is critical for growth in an economy
o Financial reporting can minimize information asymmetry
Means of financial reporting
o Examples include: - Answer The annual report
o Financial statements
o Notes to the financial statements
o Management's discussion and analysis
-Other filings with the SEC
-Filings with other regulatory agencies
-Conference calls
-Press releases
Importance of accounting standards - Answer Accounting standards facilitate clear and consistent
financial reporting
•Companies tend not to disclose detailed information unless required.
-- Voluntary disclosure is selective
•Without a single set of generally accepted accounting standards, each company would have to
negotiate accounting procedures with the parties with whom they transact
-- Users of financial statements would have to be familiar with countless sets of accounting policies of
varying quality
-- It would be difficult if not impossible to adequately compare companies
*Accounting standard setters in the US (SEC/FASB) and abroad (IASB)
, SEC - Answer -The SEC, created in 1934 to enforce securities law, was given power to prescribe
accounting standards to be followed by companies in its jurisdiction
-The SEC relies on the FASB to develop accounting standards
• However, it is the SEC that enforces their adherence
-The IASB sets standards for international use
*Accounting standard setters in the US (SEC/FASB) and abroad (IASB)
FASB - Answer -Financial Accounting Standards Board
-Created in 1973 with seven full-time board members from a variety of backgrounds
-Functions "independent" of political pressure
-Its standards are compiled in the Accounting Standards Codification (ASC)
*Accounting standard setters in the US (SEC/FASB) and abroad (IASB)
IASB - Answer -The IASB was created in 2001 with the goal of developing a single set of accounting
standards that can be used worldwide
Future of international standards for the US
(can't find this one) - Answer ?
*Objectives of accounting standards (SFAC1) - Answer To provide information to users (i.e., investors,
creditors, and others) that
• is useful in making investment, credit, and other decisions
• helps assess the amounts, timing, and uncertainty of future net cash inflows
• portrays the company's resources, obligations, and how effectively the company has used its resources
*Framework for standard setting (e.g., relevant vs. representationally faithful) - Answer The FASB sets
accounting standards within a conceptual framework that guides its decisions
