Assignment 1: Research of Emerging Accounting Issues Abstract This paper I’ll research the most important impact that the mission of the Emerging Issues Task Force (EITF) exerts upon the Financial Accounting Standards Board (FASB); analyze the EITF’s effectiveness with finding resolutions to emerging accounting issues by research the issues from the EITF’s “Description and Status of Current Issues” such as 9/11 and analyze at least the primary manner in which a company’s accounting and financial reporting is likely to be impacted by the work being done by the EITF on the chosen issues example unrecognized tax benefit. Emerging Issues Task Force exerts upon the …show more content…
Early extinguishment happens because of extraordinary reasons and losses resulting from it should be treated as extraordinary. (www.fasb.org) The work being done by the EITF with company’s accounting and financial reporting is likely to be impacted by the work being done by the EITF on Issue No. 13-C, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists." A company's accounting and financial reporting will be impacted by the work being done by the EITF in two ways. First, if the liability for an unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in the recognition of Net Operating Loss carry-forward for that year and that Net Operating Loss carry-forward has not been used, the unrecognized tax benefit will be presented as a reduction to the Net Operating Loss. In this case the Income Statement is impacted and the Net Operating Loss is reduced. Second, in all other case the Net Operating Loss carry-forward or the Tax Credit Carry-forward should be presented as a liability. In this case the Balance Sheet of the company will be impacted. (www.fasb.org) Against the EITF In the issue 1 requiring providing additional guidance on the accounting anomaly
In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).
I suspect that most of us can view and appreciate most sports such as baseball, football, and basketball. What if you were to view a Cricket World Cup game? If you didn’t know the rules you probably would not have much fun. The same happens in business if you don’t understand its language – Accounting. What rules impact a business’ Accounting Information System? What types of compliance is required?
The Codification’s goal is to clarify the company of thousands of U.S. authoritative accounting announcements published by diverse standard-setters. Therefore, to accomplish this objective, the FASB sponsored a project to incorporate and typically adapt all related accounting publication announced by the standard-setters of the U.S. in conjunction with those of the FASB, the Emerging Issues Task Force (EITF) and the American Institute of Certified Public Accountants
FASB issued this statement to replace the complex SFAS No. 96 which was concerned with the recognition of deferred income taxes. SFAS No. 109 requires that deferred tax liabilities for all taxable temporary differences and deferred tax assets for all deductible temporary differences and tax credit and operating loss carry forwards be recognized. The Balance Sheet approach is used. Deferred income tax assets and liabilities represent assets and liabilities instead of residual deferred charges and credits. Under the liability method, an enterprise recognizes a deferred tax asset or a deferred tax liability for the future income tax effects of the difference between the tax basis of the asset or liability and its reported amount in the financial statements.
For as long as human interactions have allowed the exchange of value between goods or services, accountancy has been the language of which business transactions are speaking (Salem, 2013). Accounting keeps track of and explains how money is used by non-profit organizations, for-profit businesses, governments and other individuals. Sounds simple enough right? Well, in all reality it is not that simple. Nowadays, there are many different forms of accounting let alone different set of standards that certain, and sometimes all, organizations must follow. Today there are two main standard setters in the United States that is responsible for providing up to date standards for its corresponding organizations. Although these two standards are very similar in nature, they are also very different when it comes to their own individual reporting requirements. Throughout the rest of this paper I will not only compare and contrast the differences between the Governmental Accounting Standard Board (GASB) and the Financial Accounting Standard Board (FASB), but also how they differ when it comes to their reporting requirements.
From the Board side, new disclosure requirements were to be set and the existing requirements were to be evaluated to determine if any changes or updates are necessary. The focus of the project was to examine disclosures relating to four accounting topics: Fair Value Measurement, Defined Benefit Plans, Income Taxes, Inventory. Upon examination, it was to be determined if the disclosures as written were effective and adequate. If not, the FASB would determine necessary changes to make. The Entity side of the discussion was far simpler, being that the main objective of this side of the discussion was to promote discretion when evaluating Board requirements.
In addition, a number of new business practices had developed that were not contemplated at the time of the original paper. Finally, several surveys of our members highlighted serious deficiencies in the financial reporting framework, problems that hampered their ability to analyze companies and make wellinformed financial decisions. Consequently, those CFA Institute staff and volunteer members who have the responsibility of advocating for high-quality financial reporting thought that the time had arrived for the views in the white paper to be refreshed and extended to better reflect the changed circumstances. Once the work was underway, however, the project scope was expanded to consider both conceptual issues as well as revisions to financial statement display—that is, the business reporting model in its entirety. A special group of CFA Institute volunteer members was assembled—the Business Reporting Subcommittee—and tasked with developing the new paper. The Subcommittee comprised a subset of members from two existing standing CFA Institute committees: (1) the Global Financial Reporting Advocacy Committee (GFRAC), which was responsible for addressing proposals of the International Accounting Standards Board (IASB), and (2) the Financial Accounting Policy Committee (FAPC), which had similar responsibilities for proposals of the U.S. Financial Accounting Standards Board (FASB). The Subcommittee held extensive discussions over the next
Accountants have used whatever tactics they could to place a positive spin on the financial statements. Over the years, there was a need for improvements in financial reporting. In 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34; which caused a major change in the reporting requirements of the government (Fischer, Cheng, & Taylor, 2009). This also led to a very comprehensive accounting process. GASB 34 made big improvements in how the government views their financial statements.
The analysis of a firm’s financial statements, whether it is for credit, investment, or any number of other potential purposes, relies heavily on the accounting data/information supplied by the firm in its financial reports. The presentation of such data falls under the auspices of generally accepted accounting principles (GAAP) as prescribed in the U.S. by the SEC and the FASB (Financial Accounting Standards Board) and globally by the IASB (International Accounting Standards Board) through its IFRS (International Financial Reporting Standards). The accounting principles describe the proper procedures for recording and reporting economic activities undertaken by various entities. In
At the beginning of November in 2007, the Statement of Financial Statements (SFAS) board decided to postpone the enactment of FIN 48 financial reporting and accounting and income taxes until later that year on December 15, 2007. The purpose of FIN 48 is to force public companies to analyze company’s tax positions and evaluate the probability that their tax position will require them to be audited and if they are audited will their records be sufficient and accurate. If an organization finds that their tax position is likely to not be sustained a liability is created and the tax benefit of their position decreases. Some tax positions that organizations should think about include the choice not to file a return in a certain location, a shift of revenue between tax jurisdictions, the characterization of revenue or a choice to not include reporting taxable income in tax documents. Additionally, a choice to classify a transaction, organization, or other position in a tax return as tax exempt, extra compensation in a C-Corporation, international transfer pricing, Inventory capitalization, and unrelated business income (Feeley & Driscoll, P.C, 2008)
Moreover, the update requires entities to disclose any other significant component of an entity that might not classify as discontinued operations which includes the pre-tax profit or loss. This specific guideline can be seen a bit vague since the FASB now requires a “major” line item to include other components that are not discontinued operations. As PWC states, “The revised standard […] does not provide specific guidance about how to determine which pretax line items are
Referring to AASB 112 paragraph 34, “a deferred tax asset should be recognised for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and used tax credits can be utilised.” If an entity has unused tax losses from the previous year, then it would be carried-forward. Recognising deferred tax asset (DTA) might be the most complex and subjective area of Financial Accounting Standards Board Statement paragraph 109, Accounting for Income Taxes (Petree, 1995). In this case, several companies do not want to recognize the deferred tax asset in the balance sheet. Assume that a company has suffered tax losses for two or more consecutive years, it means that the company performs badly and the probability of having profit in the future period is very low. In order to use the tax losses, a company should earn profit in the next financial year. “Unless there are strong reasonable grounds to believe that ‘it is probable that future taxable profit will be available’, such as: entering an agreement with customers for next 12 month orders, the company should not recognise the DTA, based on ground of prudence” (Kauditor, 2007). Moreover, one could disclosed unused tax losses or in the form of notes to financial statement, as an information to financial statements users. An entity shall recognise a deferred tax asset and operating loss and tax
“Due to these and other complexities, surrounding the applicability of IAS 12, there is a need to examine in reality the requirements of the principle is hard to apply in financial accounting and reporting” (Gupta, 2005). First, there is a need to examine significant improvements that can be incorporated to allow flexibility in application due to incompatibility with the various jurisdictions. To understand issues surrounding IAS 12, there is a need to understand problems cited as a limitation to its application. It is important to note that users and preparers believe that the requirements in IAS12 are unsatisfactory in certain aspects. In addition, users of financial reports do not find information courtesy of IAS 12 useful. In fact, complexity of taxes within corporations makes it quite difficult to assess its impact and prescribes suitable management strategies. As a result, clear and transparent information that is not adequately provided by IAS 12 prepared financial statements. “The standard seems to concentrate on extensive
• The theory present the reason for or the origin of government intervention in the accounting standard-setting processes being the rectification of failures in the market for accounting information
Part 2: The reasons why the current project was added to the work programme of the accounting standard-setting body