SASB LEVEL 1 EXAM Q&A
US Securities Act of the 1930s - Answer- First step of corporate disclosure
SEC was established in - Answer- 1934
FASB was established in - Answer- 1973 as an independent organization dedicated to
the development of financial accounting standards and replaced the APB
First climate change guidance by the SEC - Answer- 2010 - 1) impact of legislation and
regulation 2) international accords 3) indirect consequences of regulation or business
trends 4) physical impacts of climate change
Fletcher Report - Answer- Described many examples of securities being sold using
false or misleading information (Senate Committee on Banking and Currency)
2 major purposes of Securities Act of 1933 - Answer- 1) Protect Investors 2) Influence
Corporate Behavior
1934 Exchange Act - Answer- Gives the SEC power to establish rules to regulate
speculation and market manipulation in the stock markets and has been the primary
basis for securities fraud lawsuits - includes requirements for regular reporting i.e. 10-K
GAAP - Answer- Generally Accepted Accounting Principles established in 1938
SOS Act of 2002 - Answer- Gave SEC oversight power over the newly formed Public
Company Accounting Oversight Board which protects investors and the public interest
by working toward useful independent audit reports and establishing standards for
audits and auditors
Changing valuations - Answer- the differences between book values listed on balance
sheets and market values reflected in stock prices grows wider each year
Prudent Investors Act (UPIA) - Answer- Statute that sets out guidelines for trustees to
follow when investing trust assets - as a "prudent man" would invest his own assets
Committee on Accounting Procedure (CAP) - Answer- Became the accounting
standards setter in the US in 1938
Accounting Principles Board (APB) - Answer- Private standard-setting organization from
1959 to 1973, whose mission was to develop an overall conceptual framework. Its
official pronouncements, called APB Opinions, were to be based mainly on research
studies and be supported by reasons and analysis. The APB issued 31 opinions in its
lifetime.
, Trueblood Committee - Answer- AICPA formed this in 1971 to propose objectives of
financial reporting / the committee stated that social and economic goals of business
are equally important
Wheat Committee - Answer- Charged with identifying ways to improve the
establishment of accounting standards and it proposed the formation of FASB
FASB's primary purpose of financial reporting - Answer- Providing information to help
present and potential investors and creditors and other users in making rational
investment, credit, and similar decisions
SFAC No. 8 - Answer- FASB issues in 2010 to replace 1 and 2; reinforcing the value of
financial reporting to provide investors, lenders, and other creditors information to help
them assess the prospects for future net cash flows
Limitation on disclosure - Answer- Materiality
Discounted Cash Flow (DCF) - Answer- Valuation method used to estimate the value of
an investment based on its expected future cash flows
TSC v. Northway - Answer- There must be a substantial likelihood that the disclosure of
the omitted fact would have been viewed by the reasonable investor as having
significantly altered the "total mix" of info made available (info doesn't have to have
changed the decision to be material)
Basic v. Levinson - Answer- "Basic" test for materiality is called the
probability/magnitude test
What led to the reasoning that when a sufficiently large percentage of investors/AUM
consider sustainability important that disclosure would be justified? - Answer- In 1974
SEC said ethical investing wasn't important because ESG shareholder proposals
received 2-3% of support
10-K report - Answer- Comprehensive overview of the company's business and financial
coordination
Regulation S-K (SEC) - Answer- Lays out reporting requirements: Description of
business, Legal proceedings, Risk factors
MD&A - Answer- Item 202 of Regulation S-K: A company is expected to discuss
management's view of known trends and uncertainties that are reasonably likely to have
a material effect on results of operations and financial condition
4 main points of MD&A - Answer- 1) Focus on material info 2) Include KPI's 3) Disclose
known trends/uncertainties 4) Analyze info that is disclosed
US Securities Act of the 1930s - Answer- First step of corporate disclosure
SEC was established in - Answer- 1934
FASB was established in - Answer- 1973 as an independent organization dedicated to
the development of financial accounting standards and replaced the APB
First climate change guidance by the SEC - Answer- 2010 - 1) impact of legislation and
regulation 2) international accords 3) indirect consequences of regulation or business
trends 4) physical impacts of climate change
Fletcher Report - Answer- Described many examples of securities being sold using
false or misleading information (Senate Committee on Banking and Currency)
2 major purposes of Securities Act of 1933 - Answer- 1) Protect Investors 2) Influence
Corporate Behavior
1934 Exchange Act - Answer- Gives the SEC power to establish rules to regulate
speculation and market manipulation in the stock markets and has been the primary
basis for securities fraud lawsuits - includes requirements for regular reporting i.e. 10-K
GAAP - Answer- Generally Accepted Accounting Principles established in 1938
SOS Act of 2002 - Answer- Gave SEC oversight power over the newly formed Public
Company Accounting Oversight Board which protects investors and the public interest
by working toward useful independent audit reports and establishing standards for
audits and auditors
Changing valuations - Answer- the differences between book values listed on balance
sheets and market values reflected in stock prices grows wider each year
Prudent Investors Act (UPIA) - Answer- Statute that sets out guidelines for trustees to
follow when investing trust assets - as a "prudent man" would invest his own assets
Committee on Accounting Procedure (CAP) - Answer- Became the accounting
standards setter in the US in 1938
Accounting Principles Board (APB) - Answer- Private standard-setting organization from
1959 to 1973, whose mission was to develop an overall conceptual framework. Its
official pronouncements, called APB Opinions, were to be based mainly on research
studies and be supported by reasons and analysis. The APB issued 31 opinions in its
lifetime.
, Trueblood Committee - Answer- AICPA formed this in 1971 to propose objectives of
financial reporting / the committee stated that social and economic goals of business
are equally important
Wheat Committee - Answer- Charged with identifying ways to improve the
establishment of accounting standards and it proposed the formation of FASB
FASB's primary purpose of financial reporting - Answer- Providing information to help
present and potential investors and creditors and other users in making rational
investment, credit, and similar decisions
SFAC No. 8 - Answer- FASB issues in 2010 to replace 1 and 2; reinforcing the value of
financial reporting to provide investors, lenders, and other creditors information to help
them assess the prospects for future net cash flows
Limitation on disclosure - Answer- Materiality
Discounted Cash Flow (DCF) - Answer- Valuation method used to estimate the value of
an investment based on its expected future cash flows
TSC v. Northway - Answer- There must be a substantial likelihood that the disclosure of
the omitted fact would have been viewed by the reasonable investor as having
significantly altered the "total mix" of info made available (info doesn't have to have
changed the decision to be material)
Basic v. Levinson - Answer- "Basic" test for materiality is called the
probability/magnitude test
What led to the reasoning that when a sufficiently large percentage of investors/AUM
consider sustainability important that disclosure would be justified? - Answer- In 1974
SEC said ethical investing wasn't important because ESG shareholder proposals
received 2-3% of support
10-K report - Answer- Comprehensive overview of the company's business and financial
coordination
Regulation S-K (SEC) - Answer- Lays out reporting requirements: Description of
business, Legal proceedings, Risk factors
MD&A - Answer- Item 202 of Regulation S-K: A company is expected to discuss
management's view of known trends and uncertainties that are reasonably likely to have
a material effect on results of operations and financial condition
4 main points of MD&A - Answer- 1) Focus on material info 2) Include KPI's 3) Disclose
known trends/uncertainties 4) Analyze info that is disclosed
