The case draws on the experience of Denelle Smart, assistant comptroller for financial reporting for a New Hampshire subsidiary of a London-based company. She has been assigned a role in her company's transition from UK GAAP to International Financial Reporting Standards (IFRS) taking place throughout the European Union. In addition to describing the many challenges Denelle faces as she leads her company's transition to IFRS, this case discusses specific IAS 38 criteria, which determine how research and development costs must be accounted for under IFRS. The introductory financial accounting student is given a brief introduction to IFRS along with a review of US/UK GAAP treatment of research and development costs and capitalization of costs in general.
DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to update references to authoritative accounting standards owing to the Financial Accounting Standards Board's Accounting Standards Codification of Generally Accepted Accounting Principles.
Researchers testing the usefulness of accounting information in predicting financial distress have used many different responses as proxies for financial distress. They often compare results across these different studies, attempting to make conclusions concerning the usefulness of particular accounting information. However, comparisons are valid only if the various response variables used by the various studies have construct validity; the different response variables all measure the same intended construct, economic financial distress. The primary purpose of this paper is to determine the validity of various response variables of financial distress by observing the stability of results across three different response variables. Similar results across the different response variables w...
The global financial crisis has brought considerable focus on the accounting model for financial instruments, both in the US and around the world. The significant rise in the volumes of asset securitizations and derivative financial instrument transactions has served to bring attention to particular features of accounting standards that seem counterintuitive to some and counterproductive to others. Since the savings and loan crisis of the 1980s, the arc of development of US GAAP has been toward the use of fair values, especially for financial instruments, on balance sheets, but with substantial opportunities to keep the effects out of income statements. FASB acted relatively quickly on several fronts directly related to the crisis and its shorter term implications. FSP 157-3, addressing...
In September 2010, the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) completed the first phase of a project that will influence global standards setting for many years to come. Having a conceptual framework eliminates the need for a standards setter, such as the FASB or the IASB, to reestablish core concepts each time it develops or updates a standard. Additionally, by consistently referring to a stable conceptual framework, a standards setter is more likely to promulgate standards that are consistent with each other as well as with significant assumptions and constraints. The conceptual framework of US Generally Accepted Accounting Principles is documented in a series of Statements of Financial Accounting Concepts issued by the F...
In July 2007, the SEC chartered the Advisory Committee on Improvements to Financial Reporting (CIFR) to examine the US financial reporting system and to recommend changes that would improve the usefulness of reported financial information while reducing its complexity. While the CIFR report contains many suggestions, the focus here is on two -- adoption of principles-based accounting and guidance for application of accounting judgments -- that could dramatically reshape financial reporting and auditing. The following is a discussion of the importance of guidelines for making judgments in financial accounting and the potential impact of economic, legal, and ethical incentives on accounting judgments. The authors believe that economic, legal, and ethical incentives greatly influence the p...
, by Michael P. Young, is reviewed.
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