FASB Accounting Standards Codification: Questions

Perpetual Inventory System: when using this system, you can update the inventory account on a regular basis. The account can be increased or decreased at any time depending on whether it is a purchase or sale of merchandise that has occurred. Under this system, the purchases account does not exist and there is a cost of sales account.

The FASB process includes five steps to develop generally accepted accounting principles. The first step involves meeting and issuing a discussion memorandum. “A discussion memorandum is a document intended to encourage discussion and debate amongst accounting and financial professionals in regards to a current issue relating to the accounting industry” (“Discussion Memorandum”, n.d.). These are the ideas that will harm or benefit accountants. Next, they will obtain responses to this memorandum. After this is done FASB will create an exposure draft. Exposure drafts are basically an open blog about the new changes FASB is trying to implement. “The FASB issues a variety of different types of exposure documents to solicit input on its standards-setting

The FASB Codification database is easy to use when researching the accounting standards once the basics are fully understood. The FASB Codification database can be accessed by logging in at http://aaahq.org/ascLogin.cfm and using the following codes (case sensitive):

Within FASB codification 835-05, there are subtopics about capitalization of interest and imputation of interest. The focusing subtopic is 835-30, providing guidance on imputation of interest and how to handle exchange transactions when the face amount of a note does not reasonably represent the present value. And, amendment within Update 2015-03, which previously missing the guidance on debt issuance costs related to line-of-credit arrangements.

Fixed asset system. The costs of the facility and equipment need to be assigned to time periods.

Warehouse, financing costs, insurance costs, obsolescence, pilferage and spoilage are the key components of carrying cost. In the case of business study, carrying costs can be recorded as non-capital expenditure on the scenario cash flow statement. In contrast, carrying cost costs or savings avoided could be recorded directly on the incremental cash flow statements as gains and benefits. All factors of production have costs associated with them: labor, capital and fixed assets, for instance. The cost of labor employed in the production of services and goods is in most cases measured in terms of salaries and wages. The cost of fixed assets employed in the production process is basically measured in terms of depreciations. The cost of capital employed to acquire fixed assets is normally measured in terms of interest expenses connected with raising the

ReferencesGuinn, R.E., Schroeder, R. G. and Sevi, S. K. "Accounting for Asset Retirement Obligations Understanding the Financial Statement Impact SFAS N.O 143," Understanding the Financial Statement Impact, December 2005, available at http://www.nysscpa.org/cpajournal/2005/1205/essentials/p30.htm

Like Canadian GAAP necessities under the IFRS cost system, an asset of property, plant and equipment ought to be conveyed at its cost less any aggregated

Inventories has financial significance because the goods awaiting for sale can add or take away from the firm’s equity.

Pension obligations face several critical factors in computations of estimates; interest rates, vesting requirements, life expectancies, work-force projections, and company reorganizations. As TecQuirk administers a defined pension plan, estimates must be calculated for future pension payments, which are dependent upon contributions and the effectiveness of reserves management (Volkov,

The same cost formula is applied to all inventories having a similar nature and use to the entity

“Accounting Standards Codification (ASC) 470-20-25-10 defines convertible bonds as debt securities which are convertible into common stock of the issuer or an affiliated company at a specified price at the option of the holder,” (Schulman, 2014). Convertible bonds Under APB Opinion No. 14 you are allowed to ignore the conversion and treat the convertible bonds as a straight debt. “This approach is defended on the basis that the bond and conversion option are not separable. Thus the conversion feature itself, regardless of its nature, has no marketable valuation,” (Schroeder, Clark & Cathey, 2014, p. 392). There are about four different views opposing views, as “opponents of the current requirement argue that it results in an

Inventory is an asset, and it has value and significance to a company since it can be sold for cash. This usually occurs in a repetitive pattern during the cycle of the business, where inventory is bought, sold, created, and acquired. The central focus of a company should be matching inventory with cost and subsequent revenue (FASB 330-10-1, 2009). Defined clearly, “the primary basis of accounting for inventories is cost,…defined generally as the price paid…to acquire as asset” (FASB, 330-30-1, 2009). The Financial Accounting Standards Board (FASB) chose first-in, first-out (FIFO), last-in, first-out (LIFO), and average cost to be the only methods used to account for inventory dependent on which “reflects period income” the best (FASB 330-30-9, 2009). However, many question the use of historical cost to value inventory to be the best method and, under ideal conditions, these methods to value inventories may need adjustment as well.

In a periodic inventory system, on hand items are tracked from time to time rather than continuously. This requires the company using the system to obtain a physical count at any time they must record the inventory. The equation used in this system takes the balance of the beginning inventory, plus all purchased items, and subtracting the ending balance. This formula determines the amount of inventory that was sold or used since the previous count was taken. For example, if a store hand a beginning inventory of 1,000 units, purchased an additional 4,000 units, and had an ending balance of 2,000 units, they have determined that 3,000 units were sold.

value of an asset is allocated over its estimated useful life at the rates given in note 8.1. Depreciation