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Chapter 1: Question 13CA-b (page 25)

ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company鈥檚 financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.

Instructions:Answer the following questions.(b) Is the financial vice president acting improperly or immorally?

Short Answer

Expert verified

Yes, the financial vice president鈥檚 actions are regarded as improper or immoral.

Step by step solution

01

Meaning of Pronouncement

The term pronouncement refers to the introduction of a new standard or policy by a company for the smooth conduct of business. It also helps the company to spread important information related to the company to its stakeholders.

02

Explanation

Yes, because the rule Financial Accounting Standards Board leads to reasonable representation, it should be immediately implemented, despite its impact on net income.

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Most popular questions from this chapter

ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company鈥檚 financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.

Instructions:Answer the following questions.(c) What does Weller have to gain by advocacy of early implementation?

How are FASB preliminary views and FASB exposure drafts related to FASB 鈥渟tatements鈥�?

The following comments were made at an Annual Conference of the Financial Executives Institutes (FEI). There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to:

  1. The confusion caused by international companies announcing different results depending on the set of accounting standards applied.
  2. Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.
  3. The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.
  4. The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.
  5. The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards.

Instructions

  1. What is the International Accounting Standards Board?
  2. What stakeholders might benefit from the use of International Accounting Standards?
  3. What do you believe are some of the major obstacles to convergence?

Accounting standard-setters use the following process in establishing accounting standards:

  1. Research, exposure draft, discussion paper, standard.
  2. Discussion paper, research, exposure draft, standard.
  3. Research, preliminary views, discussion paper, standard.
  4. Research, discussion paper, exposure draft, standard.

The major key players on the international side are the:

(a) IASB and FASB. (c) SEC and FASB.

(b) IOSCO and the SEC. (d) IASB and IOSCO.
See all solutions

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