Deck 1: Introduction to Financial Reporting

Answer 1

a. The Mission of the Financial Accounting Standard Board (In Part)
The mission of the Financial Accounting Standards Board (FASB) is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors and users of financial information.
Accounting standards are essential to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, transparent and understandable financial information. Financial information about the operations and financial position of individual entities also is used by the public in making various other kinds of decisions.
To accomplish its mission, the FASB acts to:
• Improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability and on the qualities of comparability and constancy;
• Keep standards current to reflect changes in methods of doing business and changes in the economic environment;
• Consider promptly any significant areas of deficiency in financial reporting that might be improved through the standard-setting process;
• Promote the international convergence of accounting standards concurrent with improving the quality of financial reporting; and
• Improve the common understanding of the nature and purposes of information contained in financial reports.
b. Financial Accounting Standards Advisory Council
An Overview
The Financial Accounting Standards Advisory Council, FASAC or "the Council" for short, was formed in 1973 concurrent with the establishment of the Financial Accounting Standards Board (the FASB or the Board).
The primary function of FASAC is to advise the Board on issues related to projects on the Board's agenda, possible new agenda items, project priorities, procedural matters that may require the attention of the FASB, and other matters as requested by the chairman of the FASB. FASAC meetings provide the Board with an opportunity to obtain and discuss the views of a very diverse group of individuals from varied business and professional backgrounds.
The members of FASAC are drawn from the ranks of CEOs, CFOs, senior partners of public accounting firms, executive directors of professional organizations, and senior members of the academic and analyst communities.
Carrying Out the Mission
It is the job of the FASB to establish the "generally accepted accounting principles," or GAAP, to which public financial reporting by U.S. corporations must conform and to keep those principles current.
In conducting its activities, the Board strives to carefully weight the views of its users, preparers, and auditors of financial report. The Council provides an important sounding board to help the FASB understand what constituents are thinking about a wide range of issues.
FASAC's role is not to reach a consensus or to vote on the issues that it considers at its meetings. Rather, FASAC operates as a window through which the Board can obtain and discuss the representative views of the diverse groups the FASB affects. Thus, FASAC provides the forum for two-way communication. While it is important to convene the Council members as a group, that is so that the Board can hear the individual views of those members and so that the members can hear and respond to each other's views.
Members of FASAC are urged to speak out publicly on matters before the FASB and also to be supportive of the Board's process, and the principle of private-sector standard setting. Individual Council members are not expected to agree with the Board's decisions on all of the technical aspects of the projects on the Board's agenda, but it is important that FASAC members support the institution and its due process.
Structure of the Organization
FASAC is an operating arm of the Financial Accounting Foundation, an organization that is independent of any other business or professional organization. The Foundation is run by a 16-member Board of Trustees who are leaders in the business, accounting, financial, government and academic communities.
The Foundation selects the members of FASAC including the chairman and broadly oversees its operations. The Council comprises 33 members who represent a broad cross section of the Board's constituency. They are appointed for a one-year term and are eligible to be reappointed for three additional one-year terms.
The Process
The Council meets once a quarter at the FASB's offices in Norwalk, Ct. Like the FASB, FASAC is committed to following an open, orderly process that is open to public observation. In addition to the Council members, the members of the FASB, its director of research and technical activities, several members of the FASB's staff, and the chief accountant of the SEC attend each meeting.

Answer 2

Each student will select a company and obtain a copy of their annual report, 10-K, and proxy. The annual report probably has material that is not in the 10-K.

Answer 3

a. The structure is designed to support those features that are regarded as desirable in establishing the legitimacy of a standard setting organization: its members are technically expert, represent the wider community and are independent.
Review the Diagram at the website for an understanding of the structure.
b. The due process comprises six stages, with the trustees having the opportunity to ensure compliance at various points throughout:
Setting the agenda
Planning the project
Developing and publishing the discussion paper
Developing and publishing the exposure draft
Developing and publishing the standard
After the standard is issued