1 Week 2 Writing Assignment Overview ACCT 601

Exposure Drafts and Public Comments: FASB

Maria E. Paraskevopoulos

ACCT 601- Accounting Capstone

Professor: Ruizhen Hardin

DeVry University

September 15, 2019

This study source was downloaded by 100000752667788 from CourseHero.com on 05-11-2022 19:07:19 GMT -05:00

https://www.coursehero.com/file/46815287/Maria-P-Week-2-Writing-Assignment-ACCT601docx/

2 Week 2 Writing Assignment Overview ACCT 601

The FASB stands for Financial Accounting Standards Board. This board was designed to

establish standards for financial accounting. The FSAB governs the financial reports that are

prepared by nongovernmental entities. The Securities and Exchange Commission recognizes

these standards. The FASB is made up of the Financial Accounting Foundation, the FASB, the

Financial Accounting Standards Advisory Council, The Governmental Accounting Standards

Board, and the Governmental Accounting Standards Advisory Council, however is independent

from all of the other organizations. The purpose of the FASB is “establish and improve

standards of financial accounting and reporting that foster financial reporting by

nongovernmental entities that provides decision-useful information to investors and other users

of financial reports” (FASB n.d). However the board often makes changes in how thing are

done. In order to do that they must issue an Exposure Draft. The Exposure Draft became

available to the public on March 13, 2012.

Notes to Financial Statements (Topic 235)

The FASB issued this update on September 24, 2015. The deadline to complete this issue is

December 8, 2015. The main purpose to issuing a proposed account standard is they wanted to

improve the effectiveness of disclosures in the notes to financial statements. The board wanted a

clear understanding of the information that is required by GAAP. The board set standards for

the objectives to improve the effectiveness of the notes. The wanted to development a

framework that promotes consistent decisions and they wanted to correct exercise of discretion

by reporting entities.

According to the board of the FASB the amendments that are proposed in the update would

address the issues for which the Board has authority. However this update will not eliminate the

This study source was downloaded by 100000752667788 from CourseHero.com on 05-11-2022 19:07:19 GMT -05:00

https://www.coursehero.com/file/46815287/Maria-P-Week-2-Writing-Assignment-ACCT601docx/

3 Week 2 Writing Assignment Overview ACCT 601

all of the challenges that the Board my face due to the factors that are cited by stakeholders.

Those challenges are not within the Board’s control. According to FASB they have some “often

cited obstacles in the current system that may affect an entity’s incentive and ability to omit

immaterial disclosures”. They are listed below:

1. The requirement to communicate omissions of immaterial disclosures

as errors to audit committees

2. Litigation concerns

3. Possible internal control changes required to support discretion in the

preparation of information provided in disclosures

4. Possible U.S. Securities and Exchange Commission (SEC) staff

comment letters about omitted disclosures.

The amendments to Topic 235 would “state that materiality is applied to quantitative and

qualitative disclosures individually and in the aggregate” (FASB). This update will also help to

denote materiality as a legal concept. Although this would be a big update for the FASB. The

stakeholders do realize that this will not pertain to all of the entities.

Revenue from Contract with Customer (Topic 606)

The FASB issued this update on August 31, 2015 and the deadline for completion is October 15,

2015. According to the FASB, on May 28, 2014 the International Accounting Standards Board

or the ISAB and the FASB issued a converged standard. This standard was for the recognition of

revenue from contracts with customers. In June of 2014 the Boards for FASB and IASB stated

that the formation of the FASB-IASB Joint Transition Resource Group. This group was to

inform the Boards about potential implementation that could happen within organizations. This

This study source was downloaded by 100000752667788 from CourseHero.com on 05-11-2022 19:07:19 GMT -05:00

https://www.coursehero.com/file/46815287/Maria-P-Week-2-Writing-Assignment-ACCT601docx/

4 Week 2 Writing Assignment Overview ACCT 601

Board would also help stakeholders have a better understanding of the specific aspects of the

new revenue standard. However the Transition resource Group does not issue authoritative

guidance, instead they listen and evaluate feedback that they receive from stakeholders. This

will determine the action that needs to be taken.

One or the issues that derived is providing a good or service to a customer. Topic 606 will

require the entity to determine whether the nature of its promises is to provide that good or

service to the customer or to arrange for the goods or services by another party. This would be

based on whether the entity controls the products or services before it is given to the customer.

This update goes in-depth on the principal versus the agent. Some of the considerations are to

identify the unit of account that would assess whether it is a principal or agent, identify the

nature of the goods or service, applying controls to the principal for certain types of transactions,

and the interaction of the control principal that can be an indicator to asset in the principal versus

agent evaluation. The main provision is that the entity should be able to recognize revenue of

goods or services to customers.

Derivatives and Hedging (Topic 815)

The FASB prepared this update on August 6, 2015 and the deadline for completion is October 5,

2015. Derivatives and Hedging requires that embedded derivatives must be separated from the

host contract and then accounted for as derivatives. This happens if certain criteria are met. In

order for the criteria to be met is that the economic characteristics and the risks that are involved

are implanted derivative are not clearly and closely related to the economic characteristics.

The GAAP currently provides specific guidance for assessing a call or put options. These

decisions can be accelerated to the repayment of the principal on the debt. This update will be

more of guidance that the call or put options are clearly and closely related. This update would

This study source was downloaded by 100000752667788 from CourseHero.com on 05-11-2022 19:07:19 GMT -05:00

https://www.coursehero.com/file/46815287/Maria-P-Week-2-Writing-Assignment-ACCT601docx/

5 Week 2 Writing Assignment Overview ACCT 601

apply to all of the entities. These amendments would clarify the requirements for assessing

“whether contingent call or put options that can accelerate the payment of principal on debt

instruments are clearly and closely related to their debt host” (FASB). This requires a four step

process. However this would not change the current provisions by GAAP, it would only clarify

that steps that are required.

There have been 15 Propose4d Accounting Standards Updates in 2015. This first one was on

January 22, 2015 and was completed on May 29, 2015. The last update was September 24, 2015

and is due to be completed by December 8, 2015. The FASB issues different types of exposure

documents and they are all on their website from 2002.

This study source was downloaded by 100000752667788 from CourseHero.com on 05-11-2022 19:07:19 GMT -05:00

https://www.coursehero.com/file/46815287/Maria-P-Week-2-Writing-Assignment-ACCT601docx/

6 Week 2 Writing Assignment Overview ACCT 601

Bibliography

FASB, Financial Accounting Standards Board. (n.d.). Retrieved September 12, 2015, from http://www.fasb.org/facts/

(n.d.). Retrieved September 25, 2015, from http://www.fasb.org/cs/ContentServer? site=FASB&c=Page&pagename=FASB/Page/SectionPage&cid=1176157086783

FASB, Financial Accounting Standards Board. (n.d.). Retrieved September 26, 2015, from http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176166402325&acceptedDis

FASB, Financial Accounting Standards Board. (n.d.). Retrieved September 26, 2015, from http://www.fasb.org/jsp/FASB/Document_C/DocumentPage? cid=1176166355948&acceptedDisclaimer=true

FASB, Financial Accounting Standards Board. (n.d.). Retrieved September 26, 2015, from http://www.fasb.org/jsp/FASB/Document_C/DocumentPage? cid=1176166248141&acceptedDisclaimer=true

This study source was downloaded by 100000752667788 from CourseHero.com on 05-11-2022 19:07:19 GMT -05:00

https://www.coursehero.com/file/46815287/Maria-P-Week-2-Writing-Assignment-ACCT601docx/ Powered by TCPDF (www.tcpdf.org)