Intermediate_Accounting_Final

Who are the FASB' ACC 305 Intermediate Accounting I After the Great Depression, the government was concerned about improving the American way of life. To prevent such catastrophe and future problems laws and standards needed to be created. That is why we have the Financial Accounting Standards Board also known as the FASB. “The mission of the FASB is to 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. That mission is accomplished through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation’s Board of Trustees” (FASB, 2012). WHO ARE THE FASB' “Since 1973, the Financial Accounting Standards Board (FASB) has been the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the Securities and Exchange Commission (SEC) (Financial Reporting Release No. 1, Section 101, and reaffirmed in its April 2003 Policy Statement) and the American Institute of Certified Public Accountants (Rule 203, Rules of Professional Conduct, as amended May 1973 and May 1979). Such standards are important to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, and understandable financial information. The SEC has statutory authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, the Commission’s policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest” (FASB, 2012). Without the help of the FASB, all the standards and laws help protect banks, investors and etc. “In 1973, the Foundation established the FASB to establish and improve standards of financial accounting and reporting for nongovernmental entities. Consistent with that mission, the FASB maintains the FASB Accounting Standards Codification TM (Accounting Standards Codification) which represents the source of authoritative standards of accounting and reporting, other than those issued by the SEC, recognized by the FASB to be applied by nongovernmental entities. The primary function of FASAC is to advise the FASB on technical issues 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 may be requested by the FASB or its chairman. At present, the Council has more than 30 members who represent a broad cross section of the FASB’s constituency” (Spiceland, 2011). “The seven, full-time members of the FASB are appointed by the Foundation’s Board of Trustees and may serve up to two five-year terms. A 60+ person staff supports the Board. Board members and staff each have a concern for investors, other users, and the public interest in matters of financial accounting and reporting and collectively have knowledge and experience in investing, accounting, finance, business, accounting education, and research. To ensure the independence of Board members and staff, the Foundation has implemented policies about personal investments and other personal activities that are designed to prevent potential conflicts of interest. The FASB accomplishes its mission through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation’s Board of Trustees. The Rules of Procedure describe the FASB’s operating procedures, including the due process activities that are to be open to public participation or observation to provide transparency into the standards-setting process. * The FASB mission, how the mission is accomplished, and related principles that guide the Board’s standards-setting activities: * The organization in which the FASB operates * The operating procedures of the FASB, including the responsibilities of the Chairman, the composition of the FASB technical staff, the role of advisory groups including the Emerging Issues Task Force, and the role of public forums in our due process * Our various forms of communications, including the form and content of Accounting Standards Updates, Exposure Drafts, and Concepts Statements * Protocols for meetings of the FASB and voting requirements * Rules governing public announcements and the kinds of information made broadly available to the public. A high-level overview of the standards setting process as established by the Rules of Procedure follows. The nature and extent of the Boards’ specific research and outreach activities will vary from project to project, depending on the nature and scope of the reporting issues involved. 1. The Board identifies a financial reporting issues based on requests/recommendations from stakeholders or through other means. 2. The FASB Chairman decides whether to add a project to the technical agenda, after consultation with FASB Members and others as appropriate, and subject to oversight by the Foundation's Board of Trustees. 3. The Board deliberates at one or more public meetings the various reporting issues identified and analyzed by the staff. 4. The Board issues an Exposure Draft to solicit broad stakeholder input. (In some projects, the Board may issue a Discussion Paper to obtain input in the early stages of a project) 5. The Board holds a public roundtable meeting on the Exposure Draft, if necessary. 6. The staff analyzes comment letters, public roundtable discussion, and any other information obtained through due process activities. The Board re-deliberates the proposed provisions, carefully considering the stakeholder input received, at one or more public meetings. 7. The Board issues an Accounting Standards Update describing amendments to the Accounting Standards Codification” (Strischek, 2011). The recent bank crisis is a perfect example of the complex math, government regulations, and exotic securities, is the prime example of why the FASB exist. Problems like the bank crisis is caused by bad laws that allowed a several greedy business men on Main Street to take loans they could not pay back as well as on Wall Street to make loans that they knew were bad in order to make a bonus check. “At the end of the day the banks got stuck holding the bag because Wall Street borrowed money from the banks. The government has to fix the problem because both Democrats and Republicans created it, and it will cost as much as $700 billion. While Congress calls the Treasury's plan a bailout, it is not a bailout but an investment in America. If the plan works, the government will own mortgages on some Main Street houses as it pays 20 cents for the mortgages and sells most of them to investors for 40 cents. It's a practical plan in theory since losses to taxpayers for the few mortgages that will go bad will be offset by the profits government makes on the rest. By most estimates the mortgages are worth more than 40 cents on the dollar. While the Treasury package fixes one issue, the failures that got us to this crisis still exist. FASB is a rule-making board created by Congress to issue the accounting rules that are called generally accepted accounting principles, or GAAP. Lack of congressional oversight on FASB and other ineffective regulations contributed to the current crisis. For example, mark-to-market accounting is the result of FASB rule 157, which basically states that a security should be valued at the last sale -- no matter what the intrinsic value (or realistic value) of that security is in the real world. FASB 157 was introduced in part because hedge funds and corporations were using marks to inflate balance sheets and carried interest. So suspending mark-to-market completely can create other problems. However, when applied to banking institutions, FASB 157 results in losses -- and banks cannot make loans to corporations, governments, small business operators, and consumers. FASB should be in business to protect investors and prevent bankruptcies -- not in the business of making rules that kill business and investors, as it did with Rule 157 and Lehman Brothers. One solution to the crisis would be to improve mark-to-market accounting. While an improvement to FASB 157 would not reverse the current problem, reform of FASB 157 would quarantine the crisis to the mortgage market and buttress the foundation of the banking system. If securities are marked to the call price, the price where a bank would sell them, then the downward spiral could reverse for mortgage securities. Marking securities to the call as the basis of balance sheet valuation is a better alternative to the current rule, which uses last sale or bid to determine price -- because bids can go to zero and the financial failures will cause some bonds to sell for nearly zero in a foreclosure-like (or distressed) sale. Marking to an ask or call price will (1) result in prices closer to the intrinsic value of these securities; (2) support the market created by the Treasury for these securities; (3) create transparency in pricing; (4) encourage banks to sell securities; and (5) give investors an opportunity to bid for securities with the government. As Americans, we need reform because the Treasury plan can only take a sick American economy off life-support. A complete overhaul of securities regulations is needed, as there are many rules such FASB 157 that creates bigger problems than the ones they address” (Galloro, 2011). Thanks to the FASB and their board members, bankers, stakeholders, and etc. will be able to invest with an easier conscious not only in the United States but also internationally. The rules and regulations not only protect businesses but the economy. As we can clearly see how the government has supported the FASB and help created new rules and regulations to help save American’s and their homes. Reference FASB, (2012). Financial Accounting Standards Board. Retrieved from http://www.fasb.org/home Spiceland, J. D., Sepe, J. F. & Nelson, M.W. (2011). Intermediate Accounting (6th ed.). New York, N.Y.: McGraw-Hill Company Inc. Strischek, D. (2011, June). WORKING TO IMPROVE AND CONVERGE U.S. AND INTERNATIONAL ACCOUNTING STANDARDS. The RMA Journal, 93(9), 12-17, 11 Retrieved April 21, 2012, from ABI/INFORM Global. (Document ID: 2395920371). The Financial Accounting Standards Board; FASB Chairman Adds an Agenda Project on Defining "Nonpublic Entities". (2012, March). Investment Weekly News, 328. Retrieved April 21, 2012, from Banking Information Source. (Document ID: 2609097341). Vince Galloro. (2011, October). Accounting abracadabra: New FASB rule will alter how bad debt is reported. Modern Healthcare, 41(40), 30. Retrieved April 19, 2012, from ABI/INFORM Global. (Document ID: 2477301231).