The fasb’s due process for setting accounting standards includes which of the following procedures?

Financial reporting by an NFP should provide information about economic resources, obligations, net resources, and changes in them. They include (1) performance during a period, (2) nature and relationship of resource inflows and outflows, (3) service efforts and accomplishments, and (4) factors affecting liquidity.

NFPs often have no single indicator of performance comparable to a business enterprise’s net income. Accordingly, other performance indicators are needed. The most useful is information measuring the changes in the amount and nature of net resources that is combined with information about service efforts and accomplishments.

Financial reporting based on a set of global standards eliminates the need for multinational companies to revise their statements or reconcile them to the local financial reporting framework. Trading their securities on local exchanges is facilitated. Foreign investment is thereby made much easier, and the cost of capital is lowered.

The traditional approach to calculating present value uses one set of estimated cash flows and one interest rate. This approach is expected to continue to be used in many cases, for example, when contractual cash flows are involved. However, according to the FASB’s conceptual framework, the ECF approach is applicable in more complex circumstances, such as when no market or no comparable item exists for an asset or liability. The ECF results from multiplying each possible estimated amount by its probability and adding the products. The ECF approach emphasizes explicit assumptions about the possible estimated cash flows and their probabilities. The traditional method merely includes those uncertainties in the choice of interest rate. Moreover, by allowing for a range of possibilities, the ECF approach permits the use of present value when the timing of cash flows is uncertain.

Cost is a pervasive constraint on the information provided by financial reporting. The benefits of financial information should exceed the costs of reporting.

The issuance of official pronouncements of the FASB requires a simple majority of the members.

The FASB typically issues an exposure draft of the proposed Accounting Standards Update and then requests that interested parties (academics, businesses, accountants, regulators, etc.) provide feedback on the new standard either in writing or in public meetings at various stages of its due process activities. The FASB then makes a final decision based on the feedback and its deliberations.

Revenues should be recognized when they are realized or realizable and earned. The most common time at which these two conditions are met is when the product or merchandise is delivered or services are rendered to customers. Rental revenue should be recognized evenly over the period of time during which the asset is being rented.

Managerial accounting assists management decision making, planning, and control. Financial accounting addresses accounting for an entity’s assets, liabilities, revenues, expenses, and other elements of financial statements. Financial statements are the primary method of communicating to external parties information about the entity’s results of operations, financial position, and cash flows. For general-purpose financial statements to be useful to external parties, they must be prepared in conformity with accounting principles that are generally accepted in the United States. However, managerial accounting information is primarily directed to specific internal users. Thus, it ordinarily need not follow such guidance.

Relevance is a fundamental qualitative characteristic of useful financial information. It is the capacity of information to make a difference in a decision. It must have (1) predictive value, (2) confirmatory value, or both. Moreover, materiality is an entity-specific aspect of relevance. Something has predictive value if it can be used in a predictive process. Something has confirmatory value with respect to prior evaluations if it provides feedback that confirms or changes (corrects) them.

General-purpose financial reports are significantly based on estimates and do not suffice to determine the value of the entity.

Verifiability, timeliness, comparability, and understandability are qualitative characteristics that enhance the relevance and faithful representation of accounting information.

Form 8-K is a current report to disclose material events within 4 business days after such an event occurs. However, the quarterly results of operations and financial condition of a registrant (interim financial information) must be reported not on Form 8-K but on Form 10-Q, the quarterly report to the SEC. It is not required to be audited. If it is not, it must be reviewed.

The financial capital maintenance concept is the basis of (1) traditional financial statements (including net income) and (2) the full set of financial statements (including comprehensive income), discussed in the conceptual framework. Under this concept, a return on investment (defined in terms of financial capital) results only if the financial amount of net assets at the end of the period exceeds the amount at the beginning after excluding the effects of transactions with owners. Under a physical capital concept, a return on investment (in terms of physical capital) results only if the physical productive capacity (or the resources needed to achieve that capacity) at the end of the period exceeds the capacity at the beginning after excluding the effects of transactions with owners. The physical capital concept requires many assets to be measured at current (replacement) cost.

Providing information for assessing service efforts and accomplishments is one of the objectives that serves to assist in evaluating the operating results of a governmental entity.

Profit maximization is not a theoretical basis for the allocation of expense. The allocation of expenses on such a basis would subvert the purpose of GAAP to present fairly the results of operations and financial position because expenses would not be reported.

The objective is to report financial information that is useful in making decisions about providing resources to the reporting entity. Primary users of financial information are current and potential investors and creditors who cannot obtain it directly.

1. Estimates of future cash flows,
2. Expected variability of their amount and timing,
3. The time value of money (risk-free interest rate),
4. The price of uncertainty inherent in an asset or liability, and
5. Other factors, such as liquidity or market imperfections.

Form 10-Q is the quarterly report to the SEC. It need not contain audited financial statements, but it should be prepared in accordance with GAAP. Thus, an SEC registrant must obtain a review by an independent auditor of its interim financial information that is to be included in a quarterly report to the SEC.

Both materiality and relevance are characteristics defined by their ability to influence or make a difference to a decision maker. Materiality is an entity-specific aspect of relevance based on the nature, magnitude, or both of the items to which the information relates in the context of an individual entity’s financial report.