Codification of Generally Accepted Accounting Principles
Codification of GAAP: According to the American Institute of Certified Public Accountants (AICPA), changes were recently made that affected the previous Financial Accounting Standards Board (FSBA)...
View ArticleInternational Accounting, US GAAP and Financial Reporting
How does GAAP affect financial reporting? GAAP affects financial reporting in numerous ways. GAAP sets the guidelines, principles, laws, and framework for accounting professionals to follow when...
View ArticleNon-Financial Performance Measures
Non-financial performance measures: Non-financial performance measures are methods for an organization, and often consumers, vendors, and investors, to determine how well the company is doing based on...
View ArticleSarbanes-Oxley Act and Auditing
What is the Sarbanes-Oxley Act? The Sarbanes-Oxley Act of 2002, also referred to as SOX, was enacted in reaction with the public’s outcry to more closely regulate corporate and auditor accountability....
View ArticlePrivate Securities Reform Act of 1995 and Audit Liability
What are some ways in which the Private Securities Reform Act of 1995 will potentially change auditors’ legal liability and what is the potential benefit to the auditor? Some of the ways that the...
View ArticleAuditing and Public Accounting as a Guarantor of Results
Why is public accounting often viewed as a guarantor of results, or even as a provider of assurance that one’s investment is of high quality? Often public accounting is viewed as a guarantor of...
View ArticleAudit Engangement Planning
What is the purpose of engagement planning? The purpose of engagement planning is to ensure that both the auditor possesses the knowhow and capabilities needed to address the client’s needs, and that...
View ArticleThe Main Components of A Comprehensive Annual Financial Report
What is CAFR and what are its main components? CAFR is a comprehensive annual financial report for government agencies. It includes the organization’s year-end financial statements. Main components of...
View ArticleFiduciary Funds and Permanent Funds
What is the distinction, as drawn by the GASB, between a fiduciary fund and a permanent fund? Permanent funds are government funds that are accounted for on the modified accrual basis. These funds are...
View ArticleNot-for-Profit Contributions and the AARP
Many of us make pledges such as to NPR, or other organizations (religious groups, social organizations, etc…) When a not-for-profit (NFP) receives these they must account for them. Sometimes though,...
View ArticleCommon Stock or Preferred Stock?
Similarities and Differences Between Common Stock and Preferred Stock: Similarities between common stock and preferred stock are that shareholders both contribute capital, intended for use in the...
View ArticleThe Purpose and Benefits of a Stock Split
The purpose and benefits of a stock split: The main purpose of a stock split is to widen ownership of a company’s stock. When a stock splits, it reduces the market price per share, which entices new...
View ArticleWhat is the Benefit of Offering Stock Options?
A company will offer stock options when: The main reason for a company to offer stock is to gain capital (raise money) intended to be used in the operations of the business. The biggest benefit to a...
View ArticleThe Purpose of Derivative Instruments
The differences between traditional and derivative instruments: The main difference between traditional and derivative instruments is that derivatives are traded on forward markets. The term derivative...
View ArticleKeeping Paid-in Capital Separate from Earned Capital
What is owner’s equity? Owners’ equity refers to the interest that common stockholders and preferred stockholders have in a company. Stockholders are individuals who have paid-in capital to a company...
View ArticleClassifications of Investments and Financial Statement Impact
How do the various classifications of investments impact financial statements? Different forms of investments can impact financial statements in various ways. For example, held-to-maturity securities...
View ArticleHow Does Taxable Income and Financial Income Differ?
Differences between taxable and financial income: The main difference between taxable income and financial income is that financial income is reported as a pretax sum, specifically for users of...
View ArticleTax Benefits of Net Operating Losses
The tax benefits of net operating losses (NOL) are disclosed on financial statements by: The tax benefits of net operating losses are disclosed on financial statements in either one of two methods. The...
View ArticleComponents of Pension Expense and Interest Rates
The components of pension expense: The components of pension expense include: (i) service cost – the increase in the projected benefit obligation to employees, due to services rendered during the...
View ArticleFull Disclosure and Financial Statement Reporting
Does full disclosure mean more than including notes to the financial statements? Full disclosure could very well entail providing additional reports, such as projection and forecasting reports, or...
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