FAC1601 2026 EXAM SCRIPT FINAL PAPER
QUESTIONS AND ANSWERS ADVANCED
COMPILATION SET
◉ How many full-time members does the FASB have?
Answer: Seven
◉ What is the annual operating budget of the FASB primarily funded
by?
Answer: Annual accounting support fees from public companies.
◉ What is the main function of the Securities and Exchange
Commission (SEC)?
Answer: To regulate U.S. stock exchanges and ensure fair
information for investors.
◉ What authority does the SEC have regarding accounting
standards?
Answer: It has the legal authority to establish accounting standards
but currently allows the FASB to do so.
◉ What is one reason the FASB must maintain its credibility?
,Answer: To avoid losing its role as the accounting standard-setter to
the SEC.
◉ What is a significant challenge the FASB faces when setting
accounting standards?
Answer: Balancing the need for transparency with the reluctance of
businesses to disclose too much information.
◉ What was the controversy surrounding option compensation in
1994 about?
Answer: Whether to include the value of employee stock options as
part of compensation costs.
◉ What is the FASB's approach to developing new accounting
standards?
Answer: It seeks consensus by requesting public comments and
holding hearings.
◉ What is the impact of the FASB's standards on external users of
financial statements?
Answer: They help external users understand the financial condition
of companies.
◉ What happens if the FASB loses credibility?
, Answer: The SEC could take over the responsibility of setting
accounting standards.
◉ What is the relationship between the FASB and the business
community?
Answer: The FASB relies on the support and acceptance of the
business community to maintain its standards.
◉ What is one example of a complex issue the FASB has dealt with?
Answer: Accounting for motion picture profits.
◉ What was the previous accounting standards body before the
FASB?
Answer: The Accounting Principles Board.
◉ What is the significance of the FASB's public process in setting
standards?
Answer: It ensures that the standards are generally accepted and
credible.
◉ What is the role of external users in the context of financial
accounting?
Answer: To rely on accurate financial statements for making
investment decisions.
QUESTIONS AND ANSWERS ADVANCED
COMPILATION SET
◉ How many full-time members does the FASB have?
Answer: Seven
◉ What is the annual operating budget of the FASB primarily funded
by?
Answer: Annual accounting support fees from public companies.
◉ What is the main function of the Securities and Exchange
Commission (SEC)?
Answer: To regulate U.S. stock exchanges and ensure fair
information for investors.
◉ What authority does the SEC have regarding accounting
standards?
Answer: It has the legal authority to establish accounting standards
but currently allows the FASB to do so.
◉ What is one reason the FASB must maintain its credibility?
,Answer: To avoid losing its role as the accounting standard-setter to
the SEC.
◉ What is a significant challenge the FASB faces when setting
accounting standards?
Answer: Balancing the need for transparency with the reluctance of
businesses to disclose too much information.
◉ What was the controversy surrounding option compensation in
1994 about?
Answer: Whether to include the value of employee stock options as
part of compensation costs.
◉ What is the FASB's approach to developing new accounting
standards?
Answer: It seeks consensus by requesting public comments and
holding hearings.
◉ What is the impact of the FASB's standards on external users of
financial statements?
Answer: They help external users understand the financial condition
of companies.
◉ What happens if the FASB loses credibility?
, Answer: The SEC could take over the responsibility of setting
accounting standards.
◉ What is the relationship between the FASB and the business
community?
Answer: The FASB relies on the support and acceptance of the
business community to maintain its standards.
◉ What is one example of a complex issue the FASB has dealt with?
Answer: Accounting for motion picture profits.
◉ What was the previous accounting standards body before the
FASB?
Answer: The Accounting Principles Board.
◉ What is the significance of the FASB's public process in setting
standards?
Answer: It ensures that the standards are generally accepted and
credible.
◉ What is the role of external users in the context of financial
accounting?
Answer: To rely on accurate financial statements for making
investment decisions.
