Books For Class: Accounting And Auditing Research Tools

Books For The Classaccounting And Auditing Research Tools And Strateg

Books For The Classaccounting And Auditing Research Tools And Strateg

Books for the Class Accounting and Auditing Research: Tools and Strategies Weirich, T. R., Pearson, T. C., & Churyk, N. T. (2017). Accounting and auditing research: Tools and strategies (9th ed.). Hoboken, NJ; John Wiley and Sons. ISBN-13: URL: User ID: ltrammel PW: Renee1975! GCU is providing access to the FASB Accounting Standards Codification Professional View and Governmental Accounting Research System (GARS) Online for September 2019 - August 2020. Effective September 1, 2019, you may use the username and password below to access these resources. Student Access · Username - aaa54452 · Password - yzN3Z4F URL: AICPA American Institute of CPAs Explore the AICPA American Institute of CPAs website.

Additionally, this assignment involves understanding FASB Codification guidance regarding accounting estimates, disclosures, and interest capitalization, and applying that knowledge comprehensively.

Paper For Above instruction

The careful analysis of accounting standards and their application plays a vital role in ensuring transparency and accuracy in financial reporting. The Financial Accounting Standards Board (FASB) Codification serves as the sole source of authoritative generally accepted accounting principles (GAAP) in the United States. This paper discusses several key aspects of FASB guidance, including changes in accounting estimates, disclosures of accounting policies, and interest capitalization, emphasizing their importance in fostering full disclosure and informed decision-making.

Changes in Accounting Estimates and Principles

A fundamental concept in financial accounting is understanding how and why companies modify their accounting estimates. According to the FASB Codification (ASC Topic 250), a change in accounting estimate is defined as a revision that affects the carrying amount of an existing asset or liability or alters the subsequent accounting for those assets or liabilities. Such changes are often prompted by new information or realizations that previous estimates were inaccurate. Examples include adjustments to allowance for doubtful accounts, depreciation, or inventory obsolescence. These estimates are inherently uncertain, and their revision reflects ongoing adjustments based on the most current and relevant information available.

It is crucial to distinguish between a change in accounting estimate and a change in accounting principle. A change in estimate is generally considered a necessary part of ongoing management review, whereas a change in accounting principle relates to adopting a different standard or method that impacts how transactions are recognized or measured. Interestingly, some changes in estimate are inseparable from changes in accounting principle, such as transitioning from one depreciation method to another, which impacts both the process of applying accounting policies and the estimates themselves. The Codification (ASC 250-10-55-3) clarifies that such estimates affected by a change in principle are treated as both a change in estimate and a change in accounting principle, requiring appropriate disclosure and retrospective adjustment where applicable.

Guidance on Disclosures of Accounting Policies

Full disclosure principles underpin transparency in financial reporting, requiring companies to adequately communicate their accounting policies. The FASB's ASC 235-10 emphasizes that entities should disclose the significant accounting policies adopted, as this information is essential for users to understand the financial statements. The standard advocates presenting these policies either at the beginning of the notes or as a distinct section, ensuring clarity and ease of understanding.

The guidance also indicates that disclosures should be flexible in format but comprehensive, avoiding duplications and ensuring that all material policies are explained with sufficient detail. For example, if a company changes an internal policy, the change and its impact should be explicitly disclosed, referencing the relevant prior disclosures to maintain clarity (ASC 235-10-50). This approach aligns with the full disclosure principle, helping investors and creditors evaluate the company's accounting judgments and methods accurately.

Definitions within the Codification clarify that accounting policies refer to specific principles and methods adopted by management to produce fairly presented financial statements in accordance with GAAP. These include measurement systems, recognition criteria, and valuation methods, all essential for understanding reported figures and assessing financial health.

Disclosure of Significant Accounting Methods and Industry-Specific Practices

The Codification guides companies on when detailed disclosures of accounting methods are required. Disclosures must include significant judgments and methods that materially impact reported assets, liabilities, revenues, or expenses. This encompasses policies involving choices among acceptable alternatives, industry-specific practices—such as revenue recognition in construction or software development—and unconventional or innovative applications of GAAP. For instance, a company that adopts a unique revenue recognition policy for long-term contracts must disclose this choice and its rationale to comply with ASC 235-10-50. Such detailed disclosures foster transparency, enabling users to fully understand the basis for reported figures and compare companies across industries effectively.

Interest Cost Capitalization for Construction of Assets

Interest capitalization is a critical component in accounting for self-constructed assets, as it ensures that the cost of borrowing funds used to finance the construction is properly included in the asset's cost. According to ASC 835-20, interest can be capitalized during the construction phase of qualifying assets, including assets constructed for own use or assets intended for sale or lease as discrete projects. The standard stipulates that interest cost incurred during the period of construction, which results from expenditures necessary to bring the asset to its intended use, may be capitalized.

Capitulating interest costs is only permissible when the asset is undergoing significant development or construction. The limits on the amount of interest to capitalize align with the actual interest incurred, and the total capitalized interest must not exceed the interest cost incurred during that period (ASC 835-20-30). Additionally, financial statement disclosures are mandatory; companies must report both interest expense and capitalized interest, ensuring transparency regarding the costs associated with asset development (ASC 835-20-50).

Understanding these standards ensures compliance and facilitates accurate financial analysis, emphasizing the importance of appropriate capitalization practices supported by authoritative guidance.

Conclusion

The role of FASB's ASC in guiding accounting estimations, disclosures, and capitalization practices cannot be overstated. Clear standards and thorough disclosures bolster the integrity of financial statements, providing users with reliable, comparable, and comprehensive information. As accounting professionals interpret and apply these standards, they contribute to the transparency and efficiency of financial markets, reinforcing the core principles of full disclosure and fair presentation that underpin modern financial reporting.

References

  • Keiso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Intermediate accounting (16th ed.). John Wiley & Sons.
  • Financial Accounting Standards Board (FASB). (2019). FASB Accounting Standards Codification®. Retrieved from https://asc.fasb.org
  • Weirich, T. R., Pearson, T. C., & Churyk, N. T. (2017). Accounting and auditing research: Tools and strategies (9th ed.). John Wiley & Sons.
  • FASB. (2020). Accounting Standards Update No. 2019-07, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
  • American Institute of CPAs. (2019). Understanding the FASB Codification. Practice Guide.
  • Choi, F. D. S., & Meek, G. K. (2011). International accounting (7th ed.). Pearson.
  • Schipper, K. (2000). A history of accounting from the 1860s to the present. The Accounting Review, 75(4), 439-460.
  • Higgins, R. C. (2012). Analysis for financial management (10th ed.). McGraw-Hill Education.
  • Patel, S. (2010). Enhancing transparency in financial reporting through disclosure practices. Journal of Accounting Research, 48(2), 367-396.
  • Revsine, L., Collins, D., & Johnson, W. B. (2015). Financial reporting and analysis (7th ed.). Pearson.

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