SolutionpoManualpoForpoFinancialpoStatementpoAnalysis,
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chapter 1 Introduct l l
ion
ll l l to l l Financial Reporting l l
QUESTIONS
1- 1. ll a.
The AICPA is an organization of CPAs that prior to
l l l l l l l l l l l l l l l l l l
l l 1973 ac cepted the primary responsibility for the l l ll l l l l l l l l l l
l l development of generall y accepted accounting principles. l l l l ll l l l l l l
l l Their role was substantially re duced in 1973 when the
l l l l l l l l ll l l l l l l l l
l l Financial Accounting Standards Board was established. l l l l l l ll l l
Their role was further reduced with the l l l l l l l l l l l l
l l esta blishment of the Public Company Accounting
ll l l l l l l l l l l
l l Oversight Board w as established in 2002. l l l l ll l l l l l l
b. The Financial Accounting Standards Board replaced
l l l l l l l l l l
lthe Acc ounting Principles Board as the primary
l l l ll l l l l l l l l l l
lrule- l
making body for accounting standards. It is an l l l l l l l l l l l l l l
independent organization and includes members other
l l ll l l l l l l l l
than public acco
l l l l l l
untants.
c.
The SEC has the authority to determine generally l l l l l l l l l l l l l l
accepted a ccounting principles and to regulate the
l l l l ll l l l l l l l l l l
accounting profession. The SEC has elected to leave
l l l l ll l l l l l l l l l l
much of the determination of generally accepted l l l l l l l l l l l l l l
accounting principles to the private sector. l l l l l l l l l l l l
The Financial Accounting Standards Board has played l l l l l l l l l l l l
lthe major role in establishing accounting standards since
l ll l l l l l l l l l l l l
l1973. l R
egulation of the accounting profession was substantially
l l l l l l l l l l l l l
lturned over to the Public Company Accounting Oversight
l ll l l l l l l l l l l l l
lBoard in 2 002.
l l l l l l l
1-
l 2.l Consistency is obtained through the application of the same a ccounting ll ll ll ll ll ll ll ll ll ll
lprinciple from period to period.
l A change in principl
l l l l l l l l l l l l l l l l l l
e requires statement disclosure.
ll l l l l l l
1-
l 3.l The concept of historical cost determines the balance sheet
l l l l l l l l l l l l l l l l
lvaluatio n of land. The realization concept requires that a
l ll l l l l l l l l l l l l l l l l
ltransaction needs to occur for the profit to be recognized.
l l l ll l l l l l l l l l l l l l l
1- 4. a. Entity e. Historical l l cost
b. Realization f. Historical l l cost
,c. Materiality g. Disclosure
, d. Conservatism
1-
ll l l 5. Entity concept
l l
13th Edition
po
BypoCharlespoH.poGibson,poVerifiedpoChapter'spo1po-po13po|poComplete
, Chapter 1 Introduct l l
ion
ll l l to l l Financial Reporting l l
QUESTIONS
1- 1. ll a.
The AICPA is an organization of CPAs that prior to
l l l l l l l l l l l l l l l l l l
l l 1973 ac cepted the primary responsibility for the l l ll l l l l l l l l l l
l l development of generall y accepted accounting principles. l l l l ll l l l l l l
l l Their role was substantially re duced in 1973 when the
l l l l l l l l ll l l l l l l l l
l l Financial Accounting Standards Board was established. l l l l l l ll l l
Their role was further reduced with the l l l l l l l l l l l l
l l esta blishment of the Public Company Accounting
ll l l l l l l l l l l
l l Oversight Board w as established in 2002. l l l l ll l l l l l l
b. The Financial Accounting Standards Board replaced
l l l l l l l l l l
lthe Acc ounting Principles Board as the primary
l l l ll l l l l l l l l l l
lrule- l
making body for accounting standards. It is an l l l l l l l l l l l l l l
independent organization and includes members other
l l ll l l l l l l l l
than public acco
l l l l l l
untants.
c.
The SEC has the authority to determine generally l l l l l l l l l l l l l l
accepted a ccounting principles and to regulate the
l l l l ll l l l l l l l l l l
accounting profession. The SEC has elected to leave
l l l l ll l l l l l l l l l l
much of the determination of generally accepted l l l l l l l l l l l l l l
accounting principles to the private sector. l l l l l l l l l l l l
The Financial Accounting Standards Board has played l l l l l l l l l l l l
lthe major role in establishing accounting standards since
l ll l l l l l l l l l l l l
l1973. l R
egulation of the accounting profession was substantially
l l l l l l l l l l l l l
lturned over to the Public Company Accounting Oversight
l ll l l l l l l l l l l l l
lBoard in 2 002.
l l l l l l l
1-
l 2.l Consistency is obtained through the application of the same a ccounting ll ll ll ll ll ll ll ll ll ll
lprinciple from period to period.
l A change in principl
l l l l l l l l l l l l l l l l l l
e requires statement disclosure.
ll l l l l l l
1-
l 3.l The concept of historical cost determines the balance sheet
l l l l l l l l l l l l l l l l
lvaluatio n of land. The realization concept requires that a
l ll l l l l l l l l l l l l l l l l
ltransaction needs to occur for the profit to be recognized.
l l l ll l l l l l l l l l l l l l l
1- 4. a. Entity e. Historical l l cost
b. Realization f. Historical l l cost
,c. Materiality g. Disclosure
, d. Conservatism
1-
ll l l 5. Entity concept
l l
