Accounting is a standard language of measuring financial performance by a variety of organizations. Accounting follows GAAP, which are guidelines for measuring and presenting financial information on a fair, consistent, and straightforward basis.
U.S. GAAP are developed by FASB on the behalf of the SEC, with input from a variety of interest groups. IFRS are international accounting standards and are developed by IASB. Although we have seen unprecedented convergence over the last few years between U.S. GAAP and IFRS, there remain differences, which will be highlighted throughout this book.
1. Accounting
Exercise
Q1:
What is accounting?
The language of business
A standard set of rules for measuring a firm’s financial performance
An outdated system of tracking a company’s finances
A framework for assessing a company’s financial performance
2. Accounting
Exercise
Q1:
Why is accounting important?
Completely prevents manipulation of financial information
Serves as a standard language of recording financial performance
Allows company officers, investors, and general public to assess a firm’s financial performance
Standardizes financial information so that it can be assessed and compared across companies
3. Accounting
Exercise
Q1:
What is the focus of this crash course on accounting?
U.S. federal government
Individuals
Publicly traded corporations
Hospitals
Universities
4. Accounting Regulations
Exercise
Q1:
Generally Accepted Accounting Principles (GAAP) are:
Rules and regulations governing accounting
Developed by the SEC on behalf of FASB
Communicated through the issuance of Statements of Financial Accounting Standards (SFAS)
All of the above
5. IFRS
Exercise
Q1:
International Financial Reporting Standards (IFRS) are:
Rules and regulations governing international accounting
Developed by FASB and used by all EU countries
Converging with U.S. GAAP, but a number of differences still exist
Converging with U.S. GAAP, with both accounting systems set to be identical by 2007
6. FASB
Exercise
Q1:
From what sources does FASB receive input in making its decisions?
