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Chapter 1: Question 23Q (page 23)

If you were given complete authority in the matter, how would you propose that GAAP should be developed and enforced?

Short Answer

Expert verified
  • The method must be well organized, prompt, and accessible.
  • The method must be unbiased.
  • The method must instruct overall guidance in the absence of legislative authority.
  • The method must create sound besides practicalaccounting standards.

Step by step solution

01

Meaning of Generally Accepted Accounting Principles (GAAP)

Generally Accepted Accounting Principles (GAAP) comprises a collection of both broad guidelines and relatively detailed practices and procedures that accountants and accounting companies must adhere to while preparing financial statements.

02

Development and enforcement of GAAP

The changes that can be brought about in the current GAAP are as follows:

  • The rules should enclose all the loopholes prevailing in the current GAAP.
  • The principles should be made simpler and easily understandable for all its users.
  • The principles should be advanced in such a manner that it boosts the understanding of the principles.
  • The gap and differences in overseas accounting should be minimized.

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Most popular questions from this chapter

ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company’s financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.

Instructions:Answer the following questions.(c) What does Weller have to gain by advocacy of early implementation?

Distinguish between Opinions of the Accounting Principles Board and Accounting Standards Updates.

Of what value is a common set of standards in financial accounting and reporting?

Presented below are comments made in the financial press.InstructionsPrepare responses to the requirements in each item.

a) Rep. John Dingell, at one time the ranking Democrat on the House Commerce Committee, threw his support behind the FASB’s controversial derivatives accounting standard and encouraged the FASB to adopt the rule promptly. Indicate why a member of Congress might feel obligated to comment on his proposed FASB standard.

b) In a strongly worded letter to Senator Lauch Faircloth (R-NC) and House Banking Committee Chairman Jim Leach (R-IA), the American Institute of Certified Public Accountants (AICPA) cautioned against government intervention in the accounting standard-setting process, warning that it had the potential of jeopardizing U.S. capital markets. Explain how government intervention could possibly affect capital markets adversely.

Question: CA1-12 GROUPWORK (GAAP Terminology) Wayne Rogers, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the IRS.” As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms.

Instructions

Presented below is a list of common accounting acronyms. Identify the term for which each acronym stands, and provide a brief definition of each term.

(a) AICPA (e) FAF (l) FASB(b) CAP (f) FASAC (j) SEC(c) EITF (g) GAAP (k) IASB(d) APB (h) CPA
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