Intermediate 1 Research Paper

Intermediate Accounting 1 (3367) — Fall 2012 Research Assignment Questions Directions: Type your answer starting on the line after each question. 1. FASB Accounting Standards Codification FASC a. When did the FASC Codification become effective? The FASC became effective for interim and annual periods ending after September 15, 2009 even though the authoritative version of the Codification was released on July 1, 2009. b. Did the FASC change prior GAAP? The FASC did not change prior GAAP but it instead reorganized previous GAAP into a new structure. This new structure is organized into a new research database that is supposed to be user friendly and make finding certain GAAP easier to use.c. What does the FASB expect from the new FASC structure and system? The FASB has high expectations from the new FASC system including reducing the amount of time and effort that is used to solve an accounting research issue. The FASC also expects the Codification to mitigate the risk of noncompliance through easier usability of accounting literature. The Codification is also expected to provide accurate information through real time updates whenever Accounting Standards Updates are released and to assist the FASC with all of the research and convergence efforts.d. What are the â€Å"topics† used in the ASC? There are six major topics that are used in the ASC. The first one is The General Principles Area wh ich includes broad conceptual matters. The next one is The Presentation Area which shows information is presented in the financial statements.The Assets, Liabilities, and Equity Areas have guidance on all of the balance sheet accounts while the Revenue and Expense Areas have guidance on all of the income statement accounts. The next topic that is used in the ASC is The Broad Transactions Area which deals with some financial statement accounts and is generally transaction based. The final topic used in the ASC is The Industry Area which contains guidance on how to account for specific industries or activities.e. Are SEC references included in the ASC? There are SEC references included in the ASC which are used to increase the utility of the Codification for public companies. The referenced materials include: Regulation S-X, Financial Reporting Releases, Interpretative Releases, and some SEC staff guidance.2. Transfer of Receivables FASC 860-10(a) Identify relevant Codification sectio n that addresses transfers of receivables. The main relevant Codification section that addresses the transfer of receivables is FASC 860-10-55. While there is information in other sections, most of it is found within section 55.b) What are the objectives for reporting transfers of receivables? The main objective for the reporting transfers of receivables is to provide users with an understanding of a transferor’s continuing involvement with any transferred financial assets. It is also to provide any restrictions on assets reported in the financial statements and also to show how a transfer of financial assets affects a business’s financial position, financial performance and cash flows.(c) Provide definitions for the following: 1. Transfer.A transfer is the conveyance of a noncash financial asset by and to someone who is not the issuer of that financial asset. 2. Recourse. Recourse is the right of the transferee of receivables to receive payment from the transferor of those receivables for: Failure of debtors to pay when due, the effects form prepayments, or adjustments resulting from defects in the eligibility of the transferred receivables. 3. Collateral. Collateral is any personal or real property in which a security interest has been given.(d) Provide other examples (besides recourse and collateral) hat qualify as continuing involvement. Several examples of continuing involvement that are provided by the ASC include: Servicing arrangements, agreements to purchase or redeem transferred financial assets, arrangements to provide financial support and the transferor’s beneficial interests in the transferred financial asset.3. Inventories FASC 330-10(a) Identify the primary authoritative guidance for the accounting for inventories. The primary authoritative guidance for the accounting of inventories is FASB Accounting Standards Codification topic 330.b) List three types of goods that are classified as inventory. What characteristic will aut omatically exclude an item from being classified as inventory? The three types of goods that are classified as inventory are goods awaiting sale (finished goods), goods in the course of production (work-in-process), and goods to be consumed directly or indirectly in production (raw materials). The definition of inventory does not include any long term assets that are subject to depreciation accounting. Therefore if an asset is depreciable, it is not included as inventory.c) Define â€Å"market† as used in the phrase â€Å"lower-of-cost-or-market. † The word market in the phrase â€Å"lower-of-cost-or-market† means the replacement cost of your inventory. It is the cost that it would take to buy the same inventory new.4. Asset Impairments FASC 360-10 / 820-10(a) What is the authoritative guidance for asset impairments? Briefly discuss the scope of the standard (i. e. , explain the types of transactions to which the standard applies).(b) Give several examples of ev ents that would cause an asset to be tested for impairment.(c) What is the best evidence of fair value?d) Does it appear that ABC should perform an impairment test? Explain.5. Notes Payable FASC 835-30(a) Identify the authoritative literature that provides guidance on the zero-interest-bearing note. Use some of the examples to explain how the standard applies in this setting.(b) How is present value determined when an established exchange price is not determinable and a note has no ready market? What is the resulting interest rate often called?(c) Where should a discount or premium appear in the financial statements? What about issue costs?