Question

Discuss the four (4) components that make up dirty surplus accounting according to the FASB.

Answer 1

Dirty Surplus Accounting

Dirty Surplus Accounting is the process of reporting income items as part of equity rather than in an income statement is known as dirty surplus accounting. When only net income reported in the equity statement from income statement called clean-surplus accounting. Under dirty surplus accounting the income in the income statement is not “Clean”. For example, when other operating income which in net of tax is directly reported to the equity statement though that would be reported in the income statement with the heads other operating income.

Dirty surplus items include- a) Operating income items, b) Financing income or expense items, c) Balance sheet items including deffered compensation relating to grant of employee stock options and stock dividend payable.

Dirty-Surplus may arise from unrealized gains and losses on securities available

The Financial Accounting Standards Board (FASB) is an independent nonprofit organization responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations in the United States, following generally accepted accounting principles (GAAP). The FASB was formed in 1973 to succeed the Accounting Principles Board and carry on its mission

The components are: 1. The Objectives of Financial Reporting 2. The Qualities of Useful Information 3. Elements of Financial Statements 4. Recognition and Measurement.