Textbook Notes (363,566)
United States (204,628)
Accounting (115)
ACCT 1201 (75)
Chapter 1

Chapter 1 Condensed (Day 2).docx

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Northeastern University
ACCT 1201
Ronen Gal-or

Chapter 1 Condensed (Day 2) I. What is Accounting? II. The Four Basic Financial Statements III. GenerallyAccepted Accounting Principal (GAAP) IV. Management vs. Auditors V. Ethics, Reputation and Legal Liability VI. Types of Business Entities VII. Employment in theAccounting Profession III. GenerallyAccepted Accounting Principal (GAAP) Measurement rules used to develop the information in financial statements What kinds of accounts require measurement rules?  How do you measure the value of a car? How do you measure the value of a stock investment in another company? GAAP vs. IFRS A. HowAre GenerallyAcceptedAccounting Principles Determined? i. Securities and Exchange Commission (SEC) – The U.S. government agency that determines the financial statements that public companies must provide to stockholders and the measurement rules that they must use in producing those statements (SEC OVERSEES GAAP) ii. FinancialAccounting Standards Board (FASB) – The private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles (FASB DEVELOPS GAAP) iii. Changes in GAAP are actively debated, political lobbying takes place, and final rules are a compromise among the wishes of interested parties. This is why your textbook changes. B. GAAPvs. IFRS i. Since 2002, there has been substantial movement toward the adoption of International Financial Reporting Standards (IFRS) issued by the InternationalAccounting Standards Board (IASB DEVELOPS IFRS). ii. Examples of jurisdictions requiring the use of IFRS either currently or by 2012 include: 1 1. European Union 2. Australia and New Zealand 3. Hong Kong, India, Malaysia, and South Korea 4. Israel and Turkey 5. Brazil and Chile 6. Canada and Mexico iii.In the United States, the Securities and Exchange Commission now allows foreign companies whose stock is traded in the U.S. to use IFRS and is considering requiring the use of IFRS for U.S. domestic companies. IV. Management vs. Auditors A. Management responsibility - Primary responsibility for the information in the financial statements lies with management B. Auditor responsibility – Some responsibility
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