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Chapter 1: Question 20Q (page 24)

What are the primary advantages of having a codification of generally accepted accounting principles?

Short Answer

Expert verified

The primary advantage of having a codification is to assist users in enhancing and making them aware of whatGenerally Accepted Accounting Principles (GAAP) is. With the help of these, the firms can, from time to time, perform research relating to accounting problems or issues.

Step by step solution

01

Definition of Codification

Codification is the process of assembling all generally accepted accounting principles in one place. It merges all existing GAAP and creates a new level of generally accepted accounting principles (GAAP) which is acceptable by the law.

The objective of codification is to create accounting standards.

02

Primary advantages of having a codification of generally accepted accounting principles

  • Firstly, it will assist the users in providing a better understanding of what generally accepted accounting principles is.
  • Secondly, if there takes place, then companies will be in accordance with the generally accepted accounting principles, which in turn will reduce their time in addressing the accounting issues.
  • Thirdly, with the help of an online-based format, generally accepted accounting principles can be easily updated, which also assists users in staying updated.

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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.(a) What, if any, is the ethical issue involved in this case?

CA 1-4 (Financial Accounting) Omar Morena has recently completed his first year of studying accounting. His instructor for next semester has indicated that the primary focus will be the area of financial accounting.

Instructions

  1. Differentiate between financial accounting and managerial accounting.
  2. One part of financial accounting involves the preparation of financial statements. What are the financial statements most frequently provided?
  3. What is the difference between financial statements and financial reporting?

The expectations gap is:

  1. What financial information management provides and what users want.
  2. What the public thinks accountants do and what accountants think they can do.
  3. What the governmental agencies want form standard-setting and what the standard-setters provide.
  4. What the users of financial statements want from the government and what is provided.

(FASB 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. GAAP is the term used to indicate the whole body of FASB authoritative literature.
  2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements.
  3. The primary governmental body that has influence over the FASB is the SEC.
  4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard.

What was the Committee on Accounting Procedure, and what were its accomplishments and failings?
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