Throughout Your Studies, You Have Heard Of The Big Names Of

Throughout Your Studies You Have Heard Of The Big Names Of The Orga

Throughout your studies, you have heard of the "big names" of the organizations that impact accounting. But what do they really do? How do you know what the hot topics are? How are they influenced? What do they have to do with the financial reports you have been studying all quarter?

How could this impact how financial reports are produced? For example, consider how a change in the way leases are recognized may impact the liabilities on a balance sheet and expenses on an income statement (which would then impact owner's equity). For this assignment, select two of the organizations below. FASB, PCAOB, GASB, SEC, COSO, IFRS, AICPA, IMA, IIA, FEI.

Write a 2–3 page paper explaining the mission or focus of the two organizations you selected, citing at least two sources for each. Note: Wikipedia and similar sites are not appropriate sources. Use the organizations' websites or reputable publications.

Choose a current issue or "hot topic" that one organization is focused on or considers pressing. Summarize how that organization is addressing the issue. Explain how this issue affects financial report production.

Format your paper as follows: typed, double-spaced, Times New Roman font size 12, with one-inch margins. Include a cover page with the assignment title, your name, professor's name, course title, and date. The cover page and references do not count toward the page length.

Paper For Above instruction

The field of accounting is constantly shaped by influential organizations that establish standards, guide ethical practices, and address emerging issues affecting financial reporting. Two of the most prominent organizations in the accounting realm are the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC). Understanding their missions and current hot topics provides insight into their role in ensuring accurate, consistent, and reliable financial information that stakeholders depend on.

Organizational Missions and Focus

The Financial Accounting Standards Board (FASB) is an independent organization responsible for establishing generally accepted accounting principles (GAAP) in the United States. Its mission is to develop and improve financial accounting and reporting standards to provide useful information for investors, creditors, and other users of financial reports (FASB, 2023). FASB's standards aim to promote transparency, comparability, and consistency across financial statements, which are essential for decision-making in capital markets.

The Securities and Exchange Commission (SEC), on the other hand, is a federal agency tasked with regulating securities markets and protecting investors. Its mission includes enforcing securities laws and overseeing securities exchanges, brokers, and dealers to facilitate fair, efficient, and transparent markets (SEC, 2023). The SEC also has the authority to establish accounting standards for public companies, often relying on FASB's standards but maintaining ultimate oversight.

Current Hot Topic: Revenue Recognition

One significant issue currently addressed by FASB is revenue recognition, which has been a focus due to its importance in accurately depicting a company's financial health. Historically, revenue recognition practices varied across industries, leading to inconsistencies. To address this, FASB introduced the Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers," which provides a comprehensive framework for recognizing revenue aligned with the transfer of control of goods or services (FASB, 2014).

This new standard emphasizes principles-based guidelines, requiring entities to follow a five-step process to identify, measure, and recognize revenue. The goal is to improve comparability and transparency of revenue figures across entities and industries. FASB's efforts include extensive outreach and education to ensure widespread understanding and implementation of the standard.

Impact on Financial Reporting

The implementation of ASC 606 has significantly impacted how revenue is reported on financial statements. Companies now need to analyze contract terms carefully and recognize revenue in periods when control is transferred, rather than simply upon signing contracts or delivery. This shift affects several areas:

• Recognition Timing: Revenue is recognized when control is transferred, affecting the timing of reported sales and income.
• Measurement: Companies must estimate transaction prices and allocate them to performance obligations, which can introduce estimates and subjectivity.
• Financial Ratios: Changes in revenue and expense recognition can affect key financial ratios used by investors and creditors.

These changes ensure that financial reports provide a more accurate reflection of economic realities, improving stakeholder trust but also requiring companies to update systems and controls to comply with new standards.

Conclusion

In summary, organizations like FASB and the SEC play pivotal roles in shaping accounting standards that affect financial reporting. FASB's focus on developing principles-based standards, such as ASC 606 for revenue recognition, directly influences how companies report their financial results. Meanwhile, the SEC's oversight ensures these standards are enforced in public markets, maintaining investor confidence. Staying informed about their initiatives and hot topics ensures accounting professionals and stakeholders understand the evolving landscape of financial disclosure and accountability.

References

• Financial Accounting Standards Board (FASB). (2014). Revenue from Contracts with Customers (ASC 606). Retrieved from https://asc.fasb.org
• Financial Accounting Standards Board (FASB). (2023). About FASB. Retrieved from https://fasb.org
• Securities and Exchange Commission (SEC). (2023). About the SEC. Retrieved from https://sec.gov
• Kaplan, R. S., & Norton, D. P. (2004). Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business Review.
• Arnaboldi, M., Lapsley, I., & Lomeo, M. (2013). Assurance on Integrated Reporting. Accounting, Auditing & Accountability Journal, 26(7), 1048-1071.
• Chambers, D. R. (2020). Corporate Financial Reporting and Analysis. McGraw-Hill Education.
• Warren, C. S., Reeve, J. M., & Fess, P. E. (2021). Financial & Managerial Accounting. Cengage Learning.
• International Accounting Standards Board (IASB). (2014). IFRS 15 Revenue from Contracts with Customers. IFRS Foundation.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. Wiley.
• Anthony, R. N., Hawkins, D. F., & Merchant, K. A. (2014). Accounting: Texts and Cases. McGraw-Hill Education.