uaa – acct 650 seminar in executive uses of accounting dr. fred barbee

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  • Slide 1
  • UAA ACCT 650 Seminar in Executive Uses of Accounting Dr. Fred Barbee
  • Slide 2
  • History does not repeat itself, but it rhymes. Mark Twain
  • Slide 3
  • Financial reporting should be transparent, truthful and complete whether it is old economy or new economy accounting. J. Edward Ketz Associate Professor of Accounting Pennsylvania State Universitys Smeal College of Business as quoted in Goodbye to GAAP Industry Week March 2002
  • Slide 4
  • A new model for accounting wont be worth much if managers are opaque, misleading and deficient. The issues we face are more ethical than they are technical. J. Edward Ketz Associate Professor of Accounting Pennsylvania State Universitys Smeal College of Business as quoted in Goodbye to GAAP Industry Week March 2002
  • Slide 5
  • GAAP can never stand up against bad faith. The accounting rules are merely guidelines. Any company, any company at all, that wishes to game the rules, and can find a willing auditor, can distort economic reality for a surprisingly long period of time. David P. Horn, Partner Tatum CFO Partners, LLP as quoted in Goodbye to GAAP Industry Week March 2002
  • Slide 6
  • The rapid development of global financial markets has greatly reinforced the desirability of indeed now demands international consistency in accounting standards and auditing approaches. Paul Volker, Chairman of the Trustees of the IASC Foundation, www.ifad.net June 2001 www.ifad.net
  • Slide 7
  • [...] by drawing on the best of US GAAP, IFRSs and other national standards, the worlds capital markets will have a set of global accounting standards that investors can trust. Sir David Tweedie, Chairman of the IASB www.ifad.net October 2002 www.ifad.net
  • Slide 8
  • The Enron scandal shows that America can no longer take the pre-eminence of its accounting for granted.... FASB and the SEC should reexamine traditional U.S. principles and possibly embrace international standards in their place. Editorial The Economist Magazine January 19, 2002
  • Slide 9
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  • Slide 11
  • A Short History of Accounting This commentary is purely the rantings of this professor and does not represent the opinions of the Accounting Department, the College of Business & Public Policy, the University of Alaska, the State of Alaska or anyone else!!!
  • Slide 12
  • In the beginning there was nothing and darkness was upon the face of the earth for there was no accounting! And God said, there must be transparency! Let there be accounting! And there was accounting and it was crude and God said, This is not good! And finally God could stand it no longer He said There must be transparency! There must be a better way! And He created Luca Pacioli and He said, This is good!
  • Slide 13
  • Luca Pacioli created the double entry bookkeeping system and he said, This is good! Now we will have transparency! And he was very happy. Debits on the left! Credits on the right! Now we will balance! Now we will have transparency! And God looked down and said, This is better! The accounting profession was born. Things were looking up!(?)
  • Slide 14
  • In the course of time (1850) a group of accountants got together and said We must join forces! The world must know we are here! And it was so and the title Certified Public Accountant was born! And the accounting profession said, This is good! And God said Im not so sure! And the accountants were excited and said, Lets form our own association! And so they formed the Organization of Accountants (Soon to be AICPA). And they said, This is good!
  • Slide 15
  • And God said, No comment! Then along came the 1920s and financial scandals and corporate failures abounded. And everyone said, This is not good! And God said, I thought so! Again, in the course of time (1930s) the AICPA and the accounting profession said, We must fill in this GAP we must develop some rules We need GAAP! And it was so! And the AICPA said, This is good! And God said, Yeah, Right!
  • Slide 16
  • Yet again, in the course of time (?), the AICPA said, We need our own rule-making body! And all the accountants agreed, and it was so. The AICPA created the Committee on Accounting Procedure (CAP) and said, This is definitely good! And God simply refused to comment. (1959) Trouble! The CAP was not filling the GAP in GAAP and the AICPA was heard to say, We need a new rule making body this one is broken!
  • Slide 17
  • And so they did! The Accounting Principles Board (APB) was created (1960) to fill the GAP in GAAP. The AICPA was excited and said, Yes! At Last! This is good! And God could not be found! Finally, someone said, Perhaps the AICPA is part of the problem! We need a new rule-making body (this one is broken) that is independent to fill the GAP in GAAP! And it was so, and FASB was born (1973). And the accounting profession said, This is good! And God refused to return phone calls!
  • Slide 18
  • Rules! We need more rules! FASB is the answer. FASB can fill the GAP in GAAP! But alas, it was not so. FASB tried... Then came Enron! Then came WorldCom! The accounting profession was reeling and darkness was everywhere! There was no light! There was no transparency! And darkness was everywhere! And the accountants said, This is really bad!
  • Slide 19
  • And God just shook His head in wonder and amazement! Then someone said, We need a new rule- making body, this one is broken! I have the answer! We need international accounting standards! The IASB should replace the FASB! They will be able to fill the GAPs in GAAP! We will have transparency! And God once again refused to return phone calls or respond to emails! The End!
  • Slide 20
  • Com on IASB, Ill show you a thing or two!
  • Slide 21
  • The FASB... Report of the Wheat Commission resulted in the demise of the APB and the creation of a new standard-setting structure... Financial Accounting Foundation Financial Accounting Standards Board Financial Accounting Standards Advisory Council.
  • Slide 22
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  • Slide 24
  • Due Process... Two basic premises of FASB in setting accounting standards... Should be responsive to the needs and viewpoints of all concerned; Should operate in full view of the public through a due process system.
  • Slide 25
  • Steps in Due Process... A topic or project is identified and placed on the Boards agenda. A task force of experts is assembled to define problems, issues and alternatives related to the topic. Research and analysis are conducted by the FASB technical staff.
  • Slide 26
  • Steps in Due Process... A discussion memorandum is issued. A public hearing is often held, usually 60 days after release of the memorandum. The Board analyzes and evaluates the public response.
  • Slide 27
  • Steps in Due Process... The Board deliberates on the issues and prepares an exposure draft for release. After a 30-day (minimum) exposure period for public comment, the Board evaluates all of the responses received.
  • Slide 28
  • Steps in Due Process... A committee studies the exposure draft in relation to the public responses, reevaluates its position, and revises the draft if necessary. The full Board gives the revised draft final consideration and votes on issuance of a Standards Statement.
  • Slide 29
  • FASB... Passage of a new FASB Statement requires the support of 4 of the 7 Board members. FASB Statements are GAAP All ARBs and APBs in effect in 1973 continue to remain in effect, until revised, or superseded by FASB.
  • Slide 30
  • Types of Pronouncements Standards and Interpretations Financial Accounting Concepts Technical Bulletins Emerging Issues Task Force Statements
  • Slide 31
  • Standards & Interpretations Financial accounting standards issued by the FASB are considered GAAP. Interpretations represent modifications or extensions of existing standards. Have same authority as standards and require 4 of 7 members. Issued 148 Standards and 40 Opinions
  • Slide 32
  • Financial Accounting Concepts The Statements of Accounting Concepts were issued as a part of a conceptual framework project. The purpose was to set forth fundamental objectives and concepts to be used in future standards. They form a cohesive set of inter-related concepts.
  • Slide 33
  • Technical Bulletins... Issued in response to requests from various sources as to implement or apply FASB Standards or Interpretations.
  • Slide 34
  • Technical Bulletins... Issued only when... It is not expected to cause a major change in accounting practice for a number of enterprises; Its cost of implementation is low; and The guidance provided by the bulletin does not conflict with any broad fundamental accounting principle.
  • Slide 35
  • Emerging Issues Task Force Created in 1984 17 Members 11 CPA Firms 4 Companies An SEC observer A FASB representative
  • Slide 36
  • Emerging Issues Task Force The purpose of the EITF is to reach a consensus (15 of 17) on how to account for new and unusual financial transactions that have the potential for creating differing financial reporting pra

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