APPLIED FINANCIAL ACCOUNTING
RESEARCH (BUSI 570) 2024-2025 60
STUDY QUESTIONS WITH ACCURATE
SOLUTIONS AND RATED A.
1. When do we need applied financial accounting research?
Answer:
We need applied financial accounting research in situations where:
• Judgment is involved because the standard setters allow for
management discretion.
• The issue is sufficiently complex, requiring research to determine the
correct answer, even though a single correct answer exists.
• There is no direct guidance in the accounting standards for resolving
a specific reporting issue.
Explanation:
Accounting standards may not cover every possible situation, and when there
is ambiguity or a need for judgment, research helps identify the best approach
to take. The accounting literature and standards can offer some guidance, but
for unique situations, research ensures that financial reporting is accurate and
compliant with the framework.
2. What is the US standard-setting organizational structure?
Answer:
, • FAF (Financial Accounting Foundation) → FASB (Financial Accounting
Standards Board) → FASAC (Financial Accounting Standards Advisory
Council) & GASB (Governmental Accounting Standards Board) →
GASAC (Government Accounting Standards Advisory Council).
Explanation:
The FAF oversees the FASB, which sets accounting standards under U.S.
GAAP. The FASB works with FASAC and GASB for public and governmental
accounting standards. GASAC provides feedback on the effectiveness of
government accounting standards.
3. Are Basis for Conclusions (BCs) authoritative?
Answer:
No, Basis for Conclusions (BCs) are not authoritative but are useful for
understanding the thought process behind the standards.
Explanation:
The BC section in accounting standards (FASB or IASB) provides insights into
why certain decisions were made. They are not legally binding but help clarify
the intent of the standard-setting bodies, providing important context for the
interpretation of standards.
4. How do you reference the Codification in the US GAAP?
Answer:
You reference it in this format: Topic-Subtopic-Section-Paragraph.
Explanation:
The Codification organizes GAAP into a systematic structure of topics,
subtopics, sections, and paragraphs. This structure makes it easy to locate
, specific accounting guidance. For example, to find guidance on inventory, you
would use the reference format like Inventory-Overall-Initial Measurement.
5. What should you always check when referencing the Codification?
Answer:
Always check the scope & scope exceptions and implementation guidance
& illustrations sections.
Explanation:
These sections clarify the boundaries of a particular accounting standard
(scope) and provide real-world examples of how to apply the rules
(implementation guidance). These sections ensure accurate application of the
standard and help in resolving uncertainties.
6. What is the first step in the applied financial accounting research
process?
Answer:
The first step is to establish and understand the facts of the transaction.
Explanation:
Accurate and complete facts are critical in research. Without understanding
the specifics of a transaction—such as the parties involved, the timing, and
contract terms—any conclusions drawn from the accounting literature might
be flawed.
7. How do you identify the research question in the applied financial
accounting research process?
RESEARCH (BUSI 570) 2024-2025 60
STUDY QUESTIONS WITH ACCURATE
SOLUTIONS AND RATED A.
1. When do we need applied financial accounting research?
Answer:
We need applied financial accounting research in situations where:
• Judgment is involved because the standard setters allow for
management discretion.
• The issue is sufficiently complex, requiring research to determine the
correct answer, even though a single correct answer exists.
• There is no direct guidance in the accounting standards for resolving
a specific reporting issue.
Explanation:
Accounting standards may not cover every possible situation, and when there
is ambiguity or a need for judgment, research helps identify the best approach
to take. The accounting literature and standards can offer some guidance, but
for unique situations, research ensures that financial reporting is accurate and
compliant with the framework.
2. What is the US standard-setting organizational structure?
Answer:
, • FAF (Financial Accounting Foundation) → FASB (Financial Accounting
Standards Board) → FASAC (Financial Accounting Standards Advisory
Council) & GASB (Governmental Accounting Standards Board) →
GASAC (Government Accounting Standards Advisory Council).
Explanation:
The FAF oversees the FASB, which sets accounting standards under U.S.
GAAP. The FASB works with FASAC and GASB for public and governmental
accounting standards. GASAC provides feedback on the effectiveness of
government accounting standards.
3. Are Basis for Conclusions (BCs) authoritative?
Answer:
No, Basis for Conclusions (BCs) are not authoritative but are useful for
understanding the thought process behind the standards.
Explanation:
The BC section in accounting standards (FASB or IASB) provides insights into
why certain decisions were made. They are not legally binding but help clarify
the intent of the standard-setting bodies, providing important context for the
interpretation of standards.
4. How do you reference the Codification in the US GAAP?
Answer:
You reference it in this format: Topic-Subtopic-Section-Paragraph.
Explanation:
The Codification organizes GAAP into a systematic structure of topics,
subtopics, sections, and paragraphs. This structure makes it easy to locate
, specific accounting guidance. For example, to find guidance on inventory, you
would use the reference format like Inventory-Overall-Initial Measurement.
5. What should you always check when referencing the Codification?
Answer:
Always check the scope & scope exceptions and implementation guidance
& illustrations sections.
Explanation:
These sections clarify the boundaries of a particular accounting standard
(scope) and provide real-world examples of how to apply the rules
(implementation guidance). These sections ensure accurate application of the
standard and help in resolving uncertainties.
6. What is the first step in the applied financial accounting research
process?
Answer:
The first step is to establish and understand the facts of the transaction.
Explanation:
Accurate and complete facts are critical in research. Without understanding
the specifics of a transaction—such as the parties involved, the timing, and
contract terms—any conclusions drawn from the accounting literature might
be flawed.
7. How do you identify the research question in the applied financial
accounting research process?
