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Chapter 1: Question 14Q (page 22)

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

Short Answer

Expert verified

FASB preliminary views refer to those views that indicate the opinions and facts of a certain issue in accounting. An exposure draft resembles an opinion statement that comprises right and wrong opinions on the new standards presented.

Step by step solution

01

Meaning of FASB

FASB, commonly known as Financial Accounting Standards Board comprises various statements and principles set up for reasonable accounting. The activities of the Financial Accounting Standards Board (FASB) are guided and looked after by theSecurities Exchange Commission (SEC).

02

Relationship between FASB preliminary views and FASB exposure drafts in context to FASB “statements”

Research is being conducted on an identified accounting topic by the technical staff of the FASB and preliminary views are prepared thereafter that are released by the Board for public opinion. The Board examines and estimates the responses of the public to the preliminary views, discusses the issues, and then issues an 鈥渆xposure draft鈥� for public comment. The preliminary views indicate all the facts and alternatives associated with a particular topic or problem, while, the exposure draft is a provisional 鈥渟tatement鈥�. After examining the public鈥檚 response to the exposure draft, the Board may reconsider its position, revise the draft, and vote on the issuance of a financial statement.

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Most popular questions from this chapter

(GAAP and Standard-Setting) Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false.

  1. The objective of financial statements emphasizes a stewardship approach for reporting financial information.
  2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners鈥� or stockholders鈥� equity.
  3. Because they are generally shorter, FASB interpretations are subject to less due process compared to FASB standards.
  4. The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.

One of the major groups that has been involved in the standard-setting process is the American Institute of Certified Public Accountants. Initially, it was the primary organization that established accounting principles in the United States. Subsequently, it relinquished its power to the FASB.

Instructions

  1. Identify the two committees of the AICPA that established accounting principles prior to the establishment of the FASB.
  2. Speculate as to why these two organizations failed. In your answer, identify steps the FASB has taken to avoid failure.
  3. What is the present role of the AICPA in the rule-making environment?

What is the difference between the codification and the codification research system?

Of what value is a common set of standards in financial accounting and reporting?

Question: Which of the following statements is true?

(a) The IASB has the same number of members as the FASB.

(b) The IASB structure has both advisory and interpretation functions, but no trustees.

(c) The IASB has been in existence longer than the FASB.

(d) The IASB structure is quite similar to the FASB鈥檚, except the IASB has a larger number of board members.
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