About Me
CPA
1 Regulation (REG)
1.1 Ethics, Professional Responsibilities, and Federal Tax Procedures
1.1 1 Professional ethics and responsibilities
1.1 2 Federal tax procedures and practices
1.1 3 Circular 230
1.2 Business Law
1.2 1 Legal rights, duties, and liabilities of entities
1.2 2 Contracts and sales
1.2 3 Property and bailments
1.2 4 Agency and employment
1.2 5 Business organizations
1.2 6 Bankruptcy
1.2 7 Secured transactions
1.3 Federal Taxation of Property Transactions
1.3 1 Basis determination and adjustments
1.3 2 Gains and losses from property transactions
1.3 3 Like-kind exchanges
1.3 4 Depreciation, amortization, and depletion
1.3 5 Installment sales
1.3 6 Capital gains and losses
1.3 7 Nontaxable exchanges
1.4 Federal Taxation of Individuals
1.4 1 Gross income inclusions and exclusions
1.4 2 Adjustments to income
1.4 3 Itemized deductions and standard deduction
1.4 4 Personal and dependency exemptions
1.4 5 Tax credits
1.4 6 Taxation of individuals with multiple jobs
1.4 7 Taxation of nonresident aliens
1.4 8 Alternative minimum tax
1.5 Federal Taxation of Entities
1.5 1 Taxation of C corporations
1.5 2 Taxation of S corporations
1.5 3 Taxation of partnerships
1.5 4 Taxation of trusts and estates
1.5 5 Taxation of international transactions
2 Financial Accounting and Reporting (FAR)
2.1 Conceptual Framework, Standard-Setting, and Financial Reporting
2.1 1 Financial reporting framework
2.1 2 Financial statement elements
2.1 3 Financial statement presentation
2.1 4 Accounting standards and standard-setting
2.2 Select Financial Statement Accounts
2.2 1 Revenue recognition
2.2 2 Inventory
2.2 3 Property, plant, and equipment
2.2 4 Intangible assets
2.2 5 Liabilities
2.2 6 Equity
2.2 7 Compensation and benefits
2.3 Specific Transactions, Events, and Disclosures
2.3 1 Leases
2.3 2 Income taxes
2.3 3 Pensions and other post-retirement benefits
2.3 4 Derivatives and hedging
2.3 5 Business combinations and consolidations
2.3 6 Foreign currency transactions and translations
2.3 7 Interim financial reporting
2.4 Governmental Accounting and Not-for-Profit Accounting
2.4 1 Governmental accounting principles
2.4 2 Governmental financial statements
2.4 3 Not-for-profit accounting principles
2.4 4 Not-for-profit financial statements
3 Auditing and Attestation (AUD)
3.1 Engagement Planning and Risk Assessment
3.1 1 Engagement acceptance and continuance
3.1 2 Understanding the entity and its environment
3.1 3 Risk assessment procedures
3.1 4 Internal control
3.2 Performing Audit Procedures and Evaluating Evidence
3.2 1 Audit evidence
3.2 2 Audit procedures
3.2 3 Analytical procedures
3.2 4 Substantive tests of transactions
3.2 5 Tests of details of balances
3.3 Reporting on Financial Statements
3.3 1 Audit report content
3.3 2 Types of audit reports
3.3 3 Other information in documents containing audited financial statements
3.4 Other Attestation and Assurance Engagements
3.4 1 Types of attestation engagements
3.4 2 Standards for attestation engagements
3.4 3 Reporting on attestation engagements
4 Business Environment and Concepts (BEC)
4.1 Corporate Governance
4.1 1 Internal controls and risk assessment
4.1 2 Code of conduct and ethics
4.1 3 Corporate governance frameworks
4.2 Economic Concepts
4.2 1 Microeconomics
4.2 2 Macroeconomics
4.2 3 Financial risk management
4.3 Financial Management
4.3 1 Capital budgeting
4.3 2 Cost measurement and allocation
4.3 3 Working capital management
4.3 4 Financial statement analysis
4.4 Information Technology
4.4 1 IT controls and security
4.4 2 Data analytics
4.4 3 Enterprise resource planning (ERP) systems
4.5 Operations Management
4.5 1 Strategic planning
4.5 2 Project management
4.5 3 Quality management
4.5 4 Supply chain management
2 1 4 Accounting Standards and Standard-Setting Explained

1 4 Accounting Standards and Standard-Setting Explained

Key Concepts

Generally Accepted Accounting Principles (GAAP)

GAAP is a common set of accounting principles, standards, and procedures that companies in the United States use to compile their financial statements. GAAP is designed to ensure consistency, transparency, and comparability in financial reporting.

Example: A company using GAAP must follow specific rules for revenue recognition, such as recognizing revenue when it is earned and realizable, which ensures that financial statements are prepared consistently across different periods and companies.

International Financial Reporting Standards (IFRS)

IFRS is a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements. IFRS aims to provide a common language for business affairs so that company accounts are understandable and comparable across international boundaries.

Example: A multinational corporation using IFRS must adhere to standards such as IAS 16 for property, plant, and equipment, which requires the use of the cost model or the revaluation model for asset valuation, ensuring consistency and comparability across different countries.

Standard-Setting Bodies

Standard-setting bodies are organizations responsible for developing and issuing accounting standards. The primary bodies in the U.S. are the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC). Internationally, the IASB is the main standard-setting body.

Example: The FASB issues Accounting Standards Updates (ASUs) to address new or emerging accounting issues, ensuring that GAAP remains relevant and up-to-date.

Convergence of Standards

Convergence refers to the process of bringing together different accounting standards to create a single set of high-quality, globally accepted standards. The goal is to reduce the differences between GAAP and IFRS, facilitating cross-border financial reporting and analysis.

Example: The FASB and IASB have collaborated on various projects, such as the revenue recognition standard (IFRS 15 and ASC 606), to align their respective standards, making it easier for companies to report under either framework.

Impact of Accounting Standards

Accounting standards have a significant impact on financial reporting, influencing how companies record transactions, present financial statements, and communicate financial performance to stakeholders. Adhering to these standards enhances the credibility and reliability of financial information.

Example: The adoption of new revenue recognition standards (IFRS 15 and ASC 606) requires companies to change their accounting processes and systems, which can impact financial metrics and investor perceptions.

Examples and Analogies

Consider GAAP and IFRS as "languages" for financial reporting. Just as different languages can convey the same message, these standards aim to provide a consistent way to report financial information across different regions.

Standard-setting bodies are like "rule-makers" who create and update the rules of the game, ensuring that all players (companies) follow the same guidelines.

Convergence of standards is akin to "unifying dialects" to create a common language, making it easier for people from different regions to understand each other.

The impact of accounting standards is like "setting the stage" for financial reporting, ensuring that the information presented is clear, consistent, and reliable for all stakeholders.

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