Fasb financial accounting standards board essay

Thus as from the year International Accounting Standard Board and the FASB conducted an essential Memorandum of Understanding in which the International Accounting Standard Board greatly influenced the aims members to agree to move from research to draft project proposal that should be put under consideration on whether to always put into consideration an intangible asset project to the FASB and International Accounting Standard Board.

Fasb financial accounting standards board essay

SFAC 7 states that the present value of cash flow should be used to estimate the fair value. SFAC7 presented a framework for accounting measurements of present value of financial items assets and liabilities from future estimated cash flows at initial recognition. It deals only with the measurement issues, not the recognition issues.

Measurement methods for liabilities are different for different entities and require factors like credit position of their creditors to be included in the computation of present value. It also provides the principles of how to compute present value amount when the amount and the timing of the future cash flow is uncertain.

According to SFAC7, uncertainty and riskiness of the cash flow should be considered for the computation of present value. The method of computation is different than the traditional or prior method in a sense that it considers the range of estimated cash flows, not just a single amount for the cash flow and also their respective probabilities is taken into account.

All these factors help to determine the discount rate unlike prior method which had only a fixed discount rate.

Fasb Codification | Essay Example

This helped reduce the variations in prior methods of having different methods for calculating fair value with no controlled direction from generally accepted accounting principles GAAP.

It also deals with the subject concerning the interest method of amortization. Hence, this new framework of present value computation helps to clarify the difference between various sets of cash flows for decision makers in making a more relevant decision.

The Financial Accounting Standards Board FASB as standard setter therefore provided SFAC 7 as guidance to the issues of financial measurement and recognition using the cash flow Information and present value concepts in financial reporting.

Fasb Codification Essay Sample

The FASB proposes a present-value method that takes into account the degree of uncertainty associated with future cash flows among different assets and liabilities. It suggests, rather than use estimated cash flows in which a single set of cash flows and a single interest rate is used to reflect the risk associated with an asset or liabilityaccountants should use expected cash flows in which all expectations about possible cash flows are used in calculating present values.

The essence of this development stem from the fact that for nearly three decades, the FASB has been questioning the most relevant measurement attribute for financial instruments.

A measurement based on the present value of estimated future cash flows is considered to provide more relevant information than a measurement based on the undiscounted sum of those cash flows.

The traditional method to cash flow measurements has proven to be less effective though still may be appropriate under certain circumstances, such as assets and liabilities with contractual cash flows e.

Accounting applications of present value have traditionally used a single set of most likely estimated cash flows and a single interest rate, often described as "the rate commensurate with the risk.

Fasb financial accounting standards board essay

Therefore, the traditional approach assumes that a single interest rate convention can reflect all of the expectations about the future cash flows and the appropriate risk premium. The reporting of assets and liabilities at fair value on the financial statements can be aberrant, since organizations are usually composed of different kinds of assets and liabilities.

SFAC 7 sustains that measuring the expected cash flow is more efficient than the traditional approach also in circumstances such as the measurement of nonfinancial liabilities and assets. Reviewing expected cash flows is different from the traditional approach because it takes into account all expectations about possible cash flows as a replacement for only taking the most possible cash flow.

The measurement objective is to use a valuation technique which is correct for the conditions but also at the same time which makes the best use of the use of market inputs. Fair value measurement assumes the highest and best use of an asset from the perspective of market participants, regardless of how the company actually intends to use it.

Fasb financial accounting standards board essay

The SFAC 7 statement is not a declaration and also it does not directly affect existing accounting standards. It provides the standard setter with a basis upon which to build consistent GAAP. SFAC 7 Statement deals with measurement issues and was not prepared to look at other areas of accounting.

It clearly states that it was created to address measurement only, using cash flow and present value information which is and will become a very important concept as we move towards fair value accounting and IFRS.The Financial Accounting Standards Board (FASB) establishes and improves standards of financial accounting and reporting for the guidance and education of the public.

6 Explain the meaning of generally accepted accounting principles (GAAP) and the role of the Codification for GAAP.

Private Company Council (PCC)

To help accounting professionals easily navigate through plus years of unorganized US generally accepted accounting principles (GAAP) and standards the Trustees of the Financial Accounting Foundation approved the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification.).

The Financial Accounting Standard Board (FASB) sets regulations for nongovernment entities and the Government Accounting Standard Board (GASB) is the government entities regulator. They have similarities and differences designed for the type of business they monitor.

Governmental Accounting Standards Board 67 and 68 - As financial accounting has its set of rules, governmental accounting has its own. Governmental entities in preparing financial statements and related accounting report must follow the rules set by the .

The Relationship Between FASB and IASB Jennifer Purvis ACC March 14, Delphine L. Agnor Wolsker The Relationship Between FASB and IASB Introduction The International Accounting Standards Board (IASB) was created after the Financial Accounting Standards Board (FASB) to establish a single set of accounting procedures and standards for.

The Relationship Between FASB and IASB Jennifer Purvis ACC March 14, Delphine L. Agnor Wolsker The Relationship Between FASB and IASB Introduction The International Accounting Standards Board (IASB) was created after the Financial Accounting Standards Board (FASB) to establish a single set of accounting procedures and standards for.

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