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Chapter 7 Conceptual Framework Project

Chapter 7 Conceptual Framework Project. Describe content of CF Understand how the new view of accounting is embodied in the CF Evaluate the CF. Theory V FASB Conceptual Framework Project. Background and Overview The last and reigning theory Initial Agenda 1973, so… Head start?

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Chapter 7 Conceptual Framework Project

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  1. Chapter 7 Conceptual Framework Project • Describe content of CF • Understand how the new view of accounting is embodied in the CF • Evaluate the CF

  2. Theory V FASB Conceptual Framework Project • Background and Overview • The last and reigning theory • Initial Agenda 1973, so… • Head start? • Single Most Important Project-cast and cost of thousands

  3. FASB CF • A constitution….to guide, be a frame of reference, determine bounds, help users, and improve comparability • Primary Beneficiary: FASB

  4. FASB CF Contents • Overview • Ex. 7.2 Components • Ex. 7.3 Timeline • Ex. 7.7 Summary • Consider each SFAC….

  5. SFAC #1 • SFAC 1 Objectives 1978 • Trueblood but… • SFAC #1 contradiction.

  6. SFAC #1 Contradiction • Discussion teams: do you swallow the explanation of the FASB? • Evaluation of SFAC #1:

  7. FASB CF Contents • SFAC 2 Qualitative Characteristics 1980 • Identifies qualities that make info useful; if present, report info • Ex. 7. 5 • Evaluation: Tradeoffs?

  8. FASB CF • SFAC 6, 1985 (was 3, 1980) Elements of FS • Ex. 7.6, the 10 building blocks • A & L Primary • BS = IS? • CI? • SFAC 4 Non-Profit (N/A)

  9. FASB CF • SFAC 5 Recognition and Measurement 1984 • Set of financial statements • Recognition criteria • Measurement criteria • No preference for measurement • SFAC 7, “Using Cash Flow Information and PV in Accounting Measurements,” Feb. 2000

  10. FASB CF • Flavor of the CF • 1. New Accounting Model • 2. Asset & Liability Income, not Income Statement and Matching • 3. Current Value emphasis • 4. Roots in M&S, ASOBAT, Trueblood, SATTA, etc.

  11. FASB CF • Reformation vs counter-Reformation in SFAC 5. Miller, AH, 6/90 • reformation vs revolution vs counter-reformation • result: status quo

  12. Evaluation of CF • Closely Watched • Evaluation and Concerns • Cost and Time • Use? Class CF Project…. • Expectations gap? Miller’s myths…

  13. Miller’s Myths • 8 myths about CF • What do they reveal?

  14. CF Update • International CF? • Principles-based approach? • Revised CF?

  15. FASB CF Difficulties • 4 Major difficulties

  16. Theory Wrap-up: Why So Hard? • Four considerations

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