Question

Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine each of the following: 

1. The topic number (Topic XXX) that provides guidance on information contained in the notes to the financial statements.

2. The specific seven-digit Codification citation (XXX-XX-XX) that requires a company to identify and describe in the notes to the financial statements the accounting principles and methods used to prepare the financial statements. 

3. Describe the disclosure requirements.

Answer 1

Financial Accounting Standard Board (FASB):

From the year 1937 to 1973, the AICPA (The American Institute of Certified Public Accountants) took a leading part in setting the standards of accounting and financial reporting. It worked through formation one committee up to the year 1959, and in the year 1959. APB (Accounting Principles Board) replaced the committee and published 31 pronouncements during the year 1959 to 1973.

 

An independent private body known as the Financial Accounting Standards Board (FASB) came into being in mid-1973, and replaced APB. It started issuing financial accounting standards through two types of guidance to the accountants. They are:

• Statement of Financial Accounting Standards (SFAS) solves any specific financial issue.

• Statement of Financial Accounting Concepts (SFAC) works as the conceptual framework for the accounting.

 

1.                

For the notes to financial statements, identify the relevant topic number:

FASB ASC Topic number 235 “Notes to the financial statements”, deals with the guidance on information to be reported in the notes to the financial statements.

 

2.

Specific citation in FASB that provides guidance on the accounting methods and principles used to prepare the financial statements:

FASB ASC Topic number 235-10-50-3 “Notes to financial statements – Overall disclosure – What to disclose”, deals with the information that the companies should report in the accounting policies under the notes to financial statements.

 

3.

Disclosure requirements:

The disclosure of accounting policies should report the accounting principles followed by a company in preparing the financial statements, along with the methods followed in application of such accounting principles, which materially have impact on financial position, cash flows and results of operation.

 

The following items are involved in the accounting principles and methods that companies reports under disclosure notes:

• Among the exiting, available and acceptable alternatives, the selection of accounting principles and methods are selected.

• Methods and principles which are mostly followed with in the industry, those they are impracticable to operate in the industry in which the company operates.

• GAAP is used on unusual or innovative basis.

Financial Accounting Standard Board (FASB):

From the year 1937 to 1973, the AICPA (The American Institute of Certified Public Accountants) took a leading part in setting the standards of accounting and financial reporting.