Comparison of Managerial and Financial Accounting

Which of the following is true regarding the comparison of managerial and financial accounting?

• Managerial accounting is generally more precise.

• Managerial accounting has a past focus, and financial accounting has a future focus.

• The emphasis on managerial accounting is relevance, and the emphasis on financial accounting is timeliness.

• Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them.

Answer explanation

Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them.

The SEC has affirmed that it will recognize which of the following entities as an accounting standard-setter for filings under the securities laws?

• The GASB.

• The AICPA.

• The FASB.

• The IASB.

Answer explanation

The SEC recognizes the FASB as an accounting standard-setter for filings under the securities laws.

Regarding financial accounting for public companies, the role of the Securities and Exchange Commission (SEC) as currently practiced is to

• Make rules and regulations regarding filings with the SEC but not to regulate annual or quarterly reports to shareholders.

• Regulate financial disclosures for corporate, state, and municipal reporting.

• Make rules and regulations pertaining more to disclosure of financial information than to the establishment of accounting recognition and measurement principles.

• Develop and promulgate most generally accepted accounting principles.

Answer explanation

The SEC's role is more focused on disclosure of financial information rather than establishing accounting principles.

Which of the following statements best describes an operating procedure for issuing a new Accounting Standards Update?

• The Emerging Issues Task Force must approve a discussion paper before it is disseminated to the public.

• The Exposure Draft is modified per public opinion before issuing a Discussion Paper.

• A new update is issued only after a majority vote by the members of the FASB.

• A new FASB statement can be rescinded by a majority vote of the AICPA membership.

Answer explanation

A new update is issued only after a majority vote by the members of the FASB.

Which of the following statements about FASB procedures for promulgation of accounting pronouncements is false?

• A task force of experts defines specific problems.

• An exposure draft of a proposed pronouncement of the board must have been released for public comment.

• Official pronouncements require a unanimous vote for approval.

• The FASB must hold public meetings.

Answer explanation

The false statement is that official pronouncements require a unanimous vote for approval, as they only require a majority vote.

Under the FASB Accounting Standards Codification, updates to GAAP are made as

• Statements of Financial Accounting Standards.

• Accounting Standard Updates.

• Exposure Drafts.

• Accounting Statements of Position.

Answer explanation

Under the FASB Accounting Standards Codification, updates to GAAP are made as Accounting Standard Updates.

The FASB Accounting Standards Codification

• Expanded the GAAP hierarchy.

• Includes guidance on state and local governmental accounting.

• Is the single authoritative source of U.S. GAAP.

• Increases the risk of noncompliance with GAAP.

Answer explanation

The FASB Accounting Standards Codification is the single authoritative source of U.S. GAAP, consolidating all accounting standards into one cohesive framework.

Which of the following is included in the FASB Accounting Standards Codification?

• All SEC guidance.

• Governmental accounting standards.

• U.S. GAAP for nongovernmental entities.

• Guidance for special purpose frameworks.

Answer explanation

The FASB Accounting Standards Codification includes U.S. GAAP for nongovernmental entities, making it the correct choice.

Which of the following statements about the development of U.S. accounting standards is false?

• The Financial Accounting Foundation oversees the FASB.

• The Financial Accounting Standards Advisory Council (FASAC) evaluates the FASB's performance.

• Pronouncements of the FASB's predecessor bodies remain in force until amended or superseded by the FASB.

• The FASB exercises rulemaking authority delegated by the SEC.

Answer explanation

The Financial Accounting Standards Advisory Council (FASAC) evaluates the FASB's performance is false because it is the oversight responsibility of the Financial Accounting Foundation.

Which of the following documents is typically issued as part of the due-process activities of the Financial Accounting Standards Board (FASB) for amending the FASB Accounting Standards Codification?

• A proposed statement of position.

• A proposed accounting standards update.

• A proposed accounting research bulletin.

• A proposed staff accounting bulletin.

Answer explanation

A proposed accounting standards update is typically issued as part of the due-process activities of the FASB for amending the FASB Accounting Standards Codification.