Financial Ch. 1.2

Category: Accounting Basics

Tags: AccountingBusinessGAAPIFRSStandards

Entities: Financial Accounting Standards BoardGenerally Accepted Accounting PrinciplesInternational Accounting Standards BoardInternational Financial Reporting StandardsSecurities and Exchange Commission

Transcript

00:00

all right moving on to learning objective two um some more introduction material so a little bit about the organizations that govern accounting oh let me just fix this a little so you can see there we go so some important

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organizations um that oversee the accounting profession include uh the Financial Accounting Standards Board which we refer to as fby and the Securities and Exchange Commission which we refer to as the SEC you've probably

00:32

heard of them so the security Securities and Exchange Commission is of course run a government agency it oversees fby they are ultimately in charge of uh the accounting profession and their rules

00:47

however they almost historically always defer to fb's discretion in creating um the rules of accounting so the Financial Accounting Standards Board um creates

01:03

and overseas our accounting standards which are very important to keep intact the integrity and the product of what we put forth okay I think the slides I think the slides jumped a little bit sorry uh

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but anyway fby is responsible for developing our rules or standards in accounting any public company must adhere to these rules and they those rules are referred to as generally accepted accounting principles or Gap so whenever I refer to it in the classroom

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or if you're uh not in the classro watching these videos I will always refer to them as Gap um down here the second bullet it it emphasizes that the information the rules are in place to

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certainly make sure that the information we put together and present to these external users is complete accurate free from error there is no bias while putting it together um so that they have

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the best information possible to make decisions regarding how to allocate their own personal resources that is called faithful representation the making sure the information is complete neutral and free from error we also want to make sure the

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standards also provide or Gap also provides that the information is relevant it's important the without this information being included we may make a uh alternative decision so um you want to make sure any information that would

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sway you decisionwise is included in our financial reporting I didn't mention the previous slide but fby obviously the SEC is a US government agency fby is US based Gap is US however as many of you probably know

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companies operate world wide there are many companies you have to invest in um they are not typically held to Gap standards there are international financial reporting standards that are dictated by

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the International Accounting Standards Board and so internet eers is the equivalent of the US's Gap and the iasb is the equivalent of fby

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now over the years they have tried to converge and make their rules and their procedures and guidelines the same so that when a potential investor comes into play and they they are comparing

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companies in different countries that technically they are comparing Apples to Apples they know they prepare and they use the same guidelines um we've been able to converge some of our principles some of them are the same but um it is

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unlikely that we'll be able to reach that sort of compromise on every part of the financial statement you I'll mention those as we go along and throughout the course like this is an area where we agree with um Gap and iers are the same

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this is an area where they're not so it's very important if you are you know planning to kind of be an international investor that you understand the rules okay so quickly there are four really guiding

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principles um under Gap that we sort of cover in this class we're going to focus on one of them right now in this chapter the economic entity assumption okay the economic entity assumption tells us uh

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that a business is a separate entity or unit separate from its owners so you can be formed into many different

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types of businesses some of the options are listed here you can be a sole proprietorship so if any of you have a painting business or a uh if you bake or if you babysit or anything like that that might be considered a sold proprietorship where it's just you the

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one person who runs a business um by themsel you could become more complex as a business involves or more people become part owner or a partner in a business you could become a partnership

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or perhaps a corporation or limited liability company those are all different formations of business which are possible partnership is when there is one or more um Partners who come together to run a business usually accounting firm

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Law Firm things like that are often Partnerships a corporation is its own separate entity it is owned by the stockholders so people who buy stock are the owners of that Corporation and a limited liability is much like a partnership except um it does have some

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potential advantages in terms of the owners protecting themselves from any uh liability and exposure to um various forms of litigation so I'm going to end this here right now I'm going to start right where I left off on video number

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