2013 Relaunch

gaap360.com will be relaunching in 2013 (soon) with the aim of providing accounting and business students with tools to help with their accounting classes. We will be adding new resources and tools at a steady pace to ensure the quality of the sources we develop, including outlines, flash cards and sample accounting questions. Thank you for your continued support as we relaunch the site to make it better for you!

Filed under: from gaap360

FASB Chairman: Accounting Rules and Bank Capital Regulations Are Different!

Floyd Norris of the NY Times reports that FASB Chairman Robert H. Herz will announce at the AICPA’s SEC/PCAOB Developments Conference that the FASB will propose rules that provide for the “decoupling” of bank capital rules from normal accounting standards. According to Mr. Norris, the proposal would encourage bank regulators to make adjustments as they determine whether banks have adequate capital while still providing fair values of bank loans and other assets to investors.

Update

A copy Mr. Herz’s comments made at the conference are available, here.

Filed under: Uncategorized

Bush Budget: SEC Would Get Slim Increase

President Bush released his budget for fiscal 2009.  Funding for the SEC would rise less than 1% to $914 million. Rueters has this story. 

Filed under: REAL WORLD

Statement of Cash Flow Study Outline Published

We have published the following accounting study outline on cash flows (also available in word, here):  

• Statement of Cash Flows Required
• o As part of a full set of general-purpose financial statements
• o For all business enterprises and not-for-profits
• § Some limited exclusions from requirement to provide
• o Provide for each period results of operations (income statement) provided
• § SEC Rules differ in some respects
• Cash & cash equivalents (C&C)
• § Cash
• Cash on hand
• Demand deposits
• § Cash equivalents
• Short-term, highly liquid investments that are
• o Readily convertible to amounts of cash, and
• o So near maturity (THREE months or less) that the risk of changes in value because of changes in interest rates is not significant
• Examples
• o Treasury bills
• o Commercial paper
• o Money market funds
• o Federal funds sold
• Company can elect to treat a by definition “cash equivalent” as something else
• o Accounting policy election (see disclosures below)
• o Any change in policy is a change in accounting principle
• § Restate financial statements for earlier years presented
• § Gross vs. net reporting
• Gross amounts of cash receipts and payments more relevant
• Qualify for net reporting
• o Turnover is quick
• o Amounts are large
• o Maturities are short
• o Specific items that qualify
• § Investments
• § Loans receivable
• § Debt (3 months or less)
• Purpose of Statement of Cash Flows
• o Provide information on cash receipts (sources of cash) and cash disbursements (uses of cash) during a period
• o Provide liquidity or cash information to interested parties, should help these parties assess:
• § Ability to generate positive future net cash flows
• § Ability to meet obligations, pay dividends
• § Need for external financing
• § Reasons for differences between net income and associated cash receipts and cash payments
• § Effects on financial position of both cash and noncash investing and financing transactions
• o Reconciles C&C of:
• § Balance of C&C presented on balance sheet at BEGINNING of period, with
• § Balance of C&C presented on balance sheet at END of period
• § Statement of Cash Flows shows the change between these two amounts
• Classification of cash flows (three, based on nature of activity):
• o Operating
• § Items that get to net income (activities involved in producing goods and delivering services to customers)
• § Transactions involving trading securities under 115
• § Residual category – item not classified as investing or financing, goes here
• § Differences how shown based on two methods (see below)
• o Investing
• § Noncurrent asset transactions
• Fixed assets
• Investments
• Lending to others
• § Uses
• Making loans to other entities
• Purchasing available for sale and held to maturity investment securities of other entities (remember trading securities are operating)
• Acquiring PPE
• § Sources
• Collecting on previous loans you made
• Disposing of available for sale and held to maturity investments (not trading)
• Disposing of PPE
• o Financing
• § Sources
• Obtaining resources from owners
• Borrowing debt
• § Uses
• Repurchasing stock
• Repayment of debt (principal, not interest)
• Paying dividends
• Non-cash investing and financing activities
• o Material, must be supplemental disclosure
• o Portion is cash, include that in cash flow statement
• § Fixed asset for stock
• § Convert bonds to equity
• § Acquire assets through capital lease obligation
• § Exchange of non-cash assets
• Two methods of presenting statement of cash flows(only operating different)
• o Direct method
• § Recommended
• § Shows major classes of operating cash receipts and cash disbursements
• Sources
• o Cash received from customers
• o Interest received
• o Dividends received
• o Other operating cash receipts (insurance proceeds, lawsuit settlements)
• o Cash from sale of securities classified as trading securities under 115
• Uses
• o Cash paid to suppliers or employees
• o Interest paid
• o Income taxes paid
• o Cash paid to acquire securities classified as trading securities under 115
• o Other operating cash payments
• § If use, also required to provide (in separate schedule) indirect – net income to net cash flows from operating activities
• § Cash collections
• Sales to customers –
• increase in receivables+
• decrease in receivables+
• increase in unearned revenue-
• decrease in unearned revenue
• § Cash paid to suppliers/employees
• COGS+
• Increase in inventory-
• Decrease in inventory+
• Expenses+
• Increase in prepaid-
• Decrease in prepaid
• -increase in AP/other liab+
• Decrease in AP/other liab
• o Indirect method
• § Reconciles net income to net cash flows from operating activities
• § Supplemental disclosure of cash paid for interest and income taxes is required
• § Adjustments to NI (remove the effects on NI for these items which don’t impact cash)
• Non-cash items, such as amortization, depreciation, gains/losses on sales
• Rules
• o Increase in asset or debit balance
• § decrease or use of cash
• o decrease in asset or debit balance
• § increase or source of cash
• o increase in liability, equity or credit balance
• § increase or source of cash
• o Decrease in liability, equity or credit balance
• § Decrease in source of cash
• o Gains
• § adjust out of operating – negative to net income – other side investing
• o losses
• § adjust out of operating – positive in net income – other side investing
• o CLAD
• § Current assets and liabilities
• § Losses and gains
• § Amortization and depreciation
• § Deferred items
• Disclosures
• o Accounting policy on classification of items as C&C
• § Which items are treated as C&C
• § Change to policy would be disclosed and is a change in accounting principle (restate prior periods)
• o Investing and financing noncash transactions
• o If direct method used, a reconciliation of net income to net cash flow from operating activities in separate schedule (indirect method)
• o Cash flow per share (similar to EPS)
• § Is not permitted
• § May fall into the SEC’s rules on “Non-GAAP” financial measures if presented

Filed under: Uncategorized

Statement of Cash Flows Study Outline Added

We have added our first accounting study outline, Statement of Cash Flows.  We will be adding additional outlines soon!  Let us know what you think.

Filed under: Uncategorized

FASB Publishes Codification for Public Verification

Over the past several years, the FASB has been working to codify, by topic, existing U.S. GAAP into a single, online source.  Last week, the FASB issued its long-awaited Codification for public comment.  The Codification does is not intended to change existing GAAP, just make it easier to access and navigate.  The FASB is seeking user feedback during a one-year free trial, on whether the codification represents U.S. GAAP.  Users can sign-up here:  http://asc.fasb.org/  

Filed under: REAL WORLD

SEC xBRL Webcast

The SEC is expected to make a major announcement this morning regarding its xBRL, interactive data initiatives.  You can access the webcast, here. 

Filed under: REAL WORLD, xbrl

Call to Revise FASB Statement No. 123R

Graef Crystal of Bloomberg News argues: FASB Should Revise Stock Options’ Earnings Rule

Filed under: REAL WORLD

Securities and Exchange Commissioner to Leave

The SEC announced today that Commissioner Roel C. Campos will leave the Commission to return to the private sector. Mr. Campos is one of two Democratic commissioners on the SEC.

Filed under: REAL WORLD

SEC Charges Former Nicor Gas Executives

The SEC announced civil charges against three former senior executives of Nicor Gas, Chicago-based distributor of natural gas. The SEC alleges that the three executives:

participated in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out (“LIFO”) layers of gas inventory. As a result, from 1999 through 2002, the former officer defendants engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission.

 The SEC’s complaint in this matter is available, here. 

Filed under: REAL WORLD