Skills for Accounting Research

Skills for Accounting Research

FASB Codification and eIFRS Text and Cases

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Shelby Collins, CPA Accounting Research Solutions

With Tax Research Chapter By Martha L. Salzman

University at Buffalo

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Foreword

For 16 years, I taught the graduate accounting policy and research class at the University of Georgia’s J.M. Tull School of Accounting. And then , I worked closely with my successor to help him develop materials to teach the course. These experiences have taught me firsthand what a challenging, albeit rewarding, topic accounting research is for students, and what a challenging course it can be to develop. Prior to this position, my 26 years with Ernst & Young and 10 years as Chairman of the Financial Accounting Standards Board (FASB) have shown me that despite this challenge, research and communication skills are what set graduates apart in practice.

My class required students to prepare reports on real-world case studies and to participate actively in class discussions of research and current events. However, these research and com- munication skills did not always come naturally to students. I’ll never forget the time when, after assigning students a case involving revenue recognition at CBS Sports , a student approached me and said that he could not find “NFL Football” anywhere in the accounting Literature. I hinted to him that terms such as “revenue recognition” or “licensing fees” were more likely to result in relevant information for this particular case. Frequently, even identifying the right keywords to search can involve practice and finesse.

While the introduction of the FASB Codification has done a lot to facilitate guidance search- es, accounting research remains a daunting challenge for many students. In part that’s simply because of the sheer volume of guidance included within U.S. GAAP, and in part it is because accounting policy issues often don’t have black or white answers.

It’s therefore imperative that students are well trained in the resources that can help them make informed judgments. These include not only the authoritative literature, but also guid- ance for similar issues that may be relevant “by analogy” and nonauthoritative sources, such as examples from practice and interpretive guidance.

Shelby Collins is one of my former students, and a standout whom I had the privilege of nominating for a position at the FASB. When she approached me with the idea for this book, I was immediately supportive. After all, throughout my 16 years of teaching, I was unable to find a resource that met the challenge of teaching accounting students the skills necessary to perform great research, let alone prepare instructors for the challenge of teaching this course.

This book does just that. Shelby and I worked closely on the initial draft of this book, and this edition builds upon that strong foundation to incorporate even more feedback from the community of accounting research instructors. I am pleased to say that the result is a useful, and necessary resource that will enhance the quality of accounting research education-for students, instructors, and professional users alike.

With the help of this book, we can make this challenging, yet important, skill more attain- able for students.

Dennis R. Beresford Executive in Residence, University of Georgia

Former Chairman of the Financial Accounting Standards Board

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About the Authors

Shelby Collins, CPA, loves accounting research. Her current consulting position, assisting companies with implementation of the new GAAP and IFRS lease and revenue accounting stan- dards, brings a fresh and relevant perspective to this text. Prior to this position, Shelby taught the accounting research course at the University at Buffalo for six years. Her career has been dedicated entirely to this field: first at the Financial Accounting Standards Board (FASB) as a postgraduate technical assistant, then in KPMG’s Accounting Advisory Services group, and then in the accounting policy and research group at Exelon Corporation in Chicago.

Shelby has seen firsthand the doors that can open for professionals who excel in research and communication. She is eager to bring practical, real-world insights to students in a way that promotes hands-on, active learning. It’s her hope that this book, and the exercises herein, will prepare students to shine when they encounter accounting research opportunities as professionals.

Martha L. Salzman authored the tax research chapter of this book. Martha is a clinical assistant professor at the University at Buffalo School of Management, where she teaches the Masters- level professional tax research course and business law courses. Martha is a graduate of the University of Rochester (B.A., Political Science) and the University of Pennsylvania Law School (J.D.), and is licensed to practice law in the State of New York. Martha spent 18 years at the law firm of Phillips Lytle LLP, where her practice focused primarily on taxation, including advising clients regarding tax planning, compliance, audits and disputes. Martha enjoys using her real-world tax experience to better prepare students for their futures as tax and accounting professionals.

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Preface

Increasingly, accounting research and communication skills are being regarded as fundamental to success in our profession. Professionals who excel in these areas will likely experience a dis- tinct competitive advantage relative to their peers. At the same time, in today’s highly regulated business climate, the consequences of inadequately researching and documenting accounting judgments can be severe (e.g., PCAOB or SEC enforcement actions). Recognizing the impor- tance of research skills, research simulations are now a key component of the national CPA exam. This hands-on textbook aims to teach students these important skills.

In this book, students will learn to confidently address and communicate accounting research issues, from start to finish. Students will not only take away the ability to identify the accounting problem (the “researchable question”), but will gain experience locating and applying guidance within key research tools (including the FASB Codification and eIFRS), in a variety of accounting environments. In learning to use these research tools, students will have the opportunity to apply guidance to a variety of actual accounting topics.

Recognizing that students cannot learn to research simply by reading about research, the textbook offers students numerous opportunities to actively apply chapter lessons, throughout each chapter. Students will come away from this book armed with the research and critical think- ing skills necessary for success as accounting professionals.

TARGET AUDIENCE This book is intended to serve as the primary teaching materials for graduate and undergraduate courses in accounting research. The book may also be used to supplement materials used in an intermediate or advanced accounting course, given the many opportunities provided within the text to apply Codification guidance to related accounting topics (including, for example, leases, revenue recognition, and fair value measurements). Practitioners and staff training programs can also benefit from the research and communication strategies covered in this book, while gaining exposure to actual excerpts and topics covered in the Codification and other research databases.

Colleges and universities are increasingly including accounting research as a curriculum requirement for undergraduate and/or graduate-level accounting students. Often, students reach- ing this stage of their accounting program will have just completed their first accounting intern- ship. Interns, as with new staff accountants, will quickly discover that they are expected to learn on the job (accounting can be a sink-or-swim environment). These students will likely have had just enough exposure to the challenges of research that they will crave more formal instruction on this critical skill. This book will offer that to students, in a format that is understandable and engaging.

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Prerequisites for Users of this Book To get the most value from this textbook, students studying this material should have already taken introductory-level accounting courses and-to the extent that the chapters on tax and auditing research will be covered-introductory tax and introductory auditing courses.

Users of this book will need access to the FASB Codification research tool. The American Accounting Association (AAA) provides academic access to the FASB Accounting Standards Codification and the Governmental Accounting Standards Board’s GARS Online database for a low annual fee of $250 per year, per institution.

Instructors may also choose to require students to obtain a $30 annual subscription to eIFRS through the IAAER; alternatively, students can register on www.ifrs.org to obtain free access to individual standards.

To complete the exercises and case studies within the tax chapter of this book, it is suggested that users have access to an online tax research service, such as Thomson Reuters Checkpoint or CCH IntelliConnect. Access to these services is often available at reduced rates (or free-of-charge) for students enrolled in a tax or tax research course. Information on Thomson Reuters Checkpoint is available at: https://tax.thomsonreuters.corn/en/checkpoint. Information on CCH IntelliConnect is available at https://taxna.wolterskluwer.corn/research/intelliconnect.

OUTSTANDING FEATURES OF THIS BOOK This book unites research techniques with actual technical accounting issues. Students will move their understanding of accounting issues and research techniques forward along the knowledge continuum, from simply understanding to having the ability to critically think about and apply accounting issues. The practical examples and exercises in this book will challenge students to actively learn while they read.

Instructors will value that this book allows students to independently read and practice the baseline skills necessary to become accounting researchers, leaving instructors free to expand lectures into discussions of accounting judgments, student presentations, current events, and classroom discussions of ( or hands-on group practice with) case studies. In short, instructors will be able to actively engage students in classroom debates and discussions, because they can spend less of their valuable classroom time lecturing on basic research and communication skills.

Overview of the Book Chapters 1-5 of this book provide baseline knowledge that is necessary for understanding the rest of the book; the remaining chapters are written independently of one other, allowing instruc- tors to choose to utilize only those chapters that fit their individual course needs.

Chapter 1 offers an overview of accounting research, including discussion of who performs accounting research and in what circumstances, and introducing key standard setters.

Chapter 2 provides an in-depth introduction to the FASB Codification, and emphasizes that students should perform Browse (as opposed to keyword searches) when possible.

Chapter 3 introduces the research process, and Chapter 4 introduces the fundamentals of effective technical writing, including the format of an accounting issues memorandum, tech- niques for effective email communication of research, and appropriate style for technical accounting writing.

Chapter 5 teaches students how to properly use nonauthoritative resources (e.g., Concepts Statements, firm resources, benchmarking), an essential but often overlooked skill for pro- fessionals learning to perform research.

Chapters 6–8 give students the opportunity to apply guidance to accounting issues following the order of sections in the Codification: first, issues involving scope and recognition (Ch. 6), followed by accounting measurement (Ch . 7), and specifically fair value measurement (Ch. 8).

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Chapters 9-12 introdu ce skills specific to performing research in other environments, including auditing and professional services research (C h. 9), gove rnm ental resea rch (C h. 10), tax research (Ch. 11 ), and intern ati onal research (Ch . 12). Each of these chapters stands on its own, so in structors can choose to cover only the chapters relevant to their own courses.

Finally, Chapters 13 and 14 foc us on softer ski lls. Chapter 13 teaches stu de nts how to prepare and deli ver effecti ve presentations. Chapter 14 emphas izes the need fo r profess ionals to stay current as accounting requirements change and introduces the standard setters’ due process for issuing new guidance. This chapter is a mu st-read and encourages students to sign up fo r accounting news alerts.

Engaging Pedagogy Research is a skill that you learn by doing; accordingly, the pedagogy in thi s book is designed to fos ter active learning.

Chapter Opening Vignettes, Learning Objectives, and “Organization of This Chapter” Diagrams Each chapter opens with a brief vignette placin g students in the shoes of a beginning researcher. This opening vignette is fo llowed by a li st of the learnin g obj ectives for the chapter, and then by a diagram illustratin g the organ ization of co nte nt within the chapter. These chapter-openi ng ele- ments are intended to generate reader enthu sias m for chapter co ntent, as well as prov ide stude nts with an overview of the infor mation to co me.

Example Chapter Opening Vignette (from Chapter 6, Scope)

Printout in hand , Julie taps on her boss’s door. She is feeling pretty good ; she just

found a paragraph in the guidance that appears to speak directly to the tax accrual

issue her boss asked her to research. As she shows him the guidance , he taps his

pen thoughtfully on the desk.

“Are you sure this guidance applies to our type of transaction?” he asks .

He continues , “I think the guidance for gross receipts taxes (which are based

on revenue measures) may differ from guidance for taxes based on income. You ‘ve

brought me guidance specific to income taxes.”

Julie shakes her head ; she realizes that she forgot to review the scope section

of the guidance that she had printed. “Let me double check the scope section for this

guidance ,” she says. “I’ll stop by again later to let you know what I’ve found. ”

Confirming that a transaction is within the scope of a Codification topic may seem

like an extra step, but much of the guidance within the Codification includes specific

instructions for its use. Don’t get caught like Julie, forgetting to do the appropriate dili-

gence work on guidance that may otherwise appear to be on point. A proper review of

the scope section is critical to identifying appropriate recognition , and then measure-

ment, guidance for a transaction .

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Example Learning Objectives (from Chapter 2, regarding the FASS Codification)

After reading this chapter and performing the exercises herein, you will be able to

1. Describe the purpose of the Codification , and the meaning of authoritative.

2. Identify standard setters that have contributed to the current body of authoritative

guidance.

3. Understand the organization of guidance within the Codification.

4. Perform effective Browse searches within the Codification , reviewing all areas of

required reading.

5. Search the Codification using other methods, including keyword searches, the Master

Glossary, and the Cross Reference feature.

6. Differentiate between existing versus pending content, and understand how to inter-

pret transition date guidance.

7. Recognize accounting alternative guidance available for private companies.

Example “Organization of This Chapter” Diagram (from Chapter 3, regarding the research process) Eac h chapter includes a graphic showing the organization of topics within the chapter, along with narrati ve discussion of what the reader can expect key chapter themes to include. Following is one such chapter organization graphic:

Steps in the Research Process

0. Understand the business (i ndustry). Judgment and 1. Understand the transaction. Decision Making

2. Define the research problem . in the Research Next Chapter: 3. Think independently about possible -….. Process -….. Documenting

sol utions. ~ 1. Common biases – accounting 4. Search potentially relevant sou rces of 2. Ove rcoming research

guidance . biases to reach

5. Analyze the alternative treatments. sound decisions

6. Justify and document yo ur conclusion.

Chapter Features Chapters are written in concise, easy to understand language, with boldfaced key terms to call students’ attention to certain topics. In addition, chapters include extensive screenshots (from research tools, particularly the Codification) and diagrams illu stra ting key chapter concepts, intended to both engage students and improve their fa miliarity with research tools.

Chapters also include the fo llowing fea tu res , intended to engage students in active learning :

Now You Try Throughout each chapter, students are challenged to practice and apply key skills as they are taught (Now YOU Try questions) . These exercises might involve , fo r example, a student being asked to “draw a picture” of a transaction, “draft an email” describing an issue, “show the search path you would use,” or “identify the journal entries” for a scenario, using guidance fro m the Codification as a guide for the appropriate accounting. Instructors can use these questions as a lead-in to acti ve in-class discussions.

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Example Case Study Question (from Chapter 4, regarding effective communication)

Writing a Short Iss ues Memo-In ventory Va luati on You have been asked to draft a brief issues memo (“to the files”) analyzing the following issue.

Charles Corp. has leased a mine from which it recently extracted 2,000 kilograms of bauxite (a min- eral used in producing aluminum). Charles Corp. plans to sell the bauxite to aluminum manufacturers. Charles Corp. is analyzing whether its bauxite inventory can be carried at its selling price per ASC 330- I0-35- I 6(b) . Assume that quoted market prices are generally available for bauxite, and that the market for bauxite is active.

Using the standard memo format, analyze whether all necessary conditions are met for the accounting treatment proposed. If assumptions are needed to fully evaluate the guidance, identify those assumptions in your analysis. For this particular memo, you are not required to present alternative treatments; assume for this issue that you have solely been asked to document whetherthe conditions in ASC 330-I0-35-16(b) are met.

NEW TO THIS EDITION

• MyBusinessCourse: New video examples have been added to MBC.

• New Standards: Includes strategies for navigating the revised revenue and lease topics and new assignments requiring students to research and interpret the new standards and to docu- ment and communicate their findings.

• Codification: Presents updated screenshots of the Codification featuring the latest standards.

• Updated Detailed Research Example: The author presents a real research question involving baseball stadium concession sales (Lease? Revenues?) and integrates it throughout Chapters 3 and 4. Students will follow this real-world example through the research, process culmi- nating in a new chapter-end sample memo.

• Case Studies: The text includes new, current, and real-world case studies of varying dif- ficulty level-including cases building upon the stadium example. Cases place increased emphasis upon the use of professional judgment.

SUPPLEMENTS All supplements for this book have been created by the book’s authors.

Instructors Manual-Includes resources for instructors of this course, including sample course schedules and grading considerations, teaching tips for each chapter, and links to external resources.

PowerPoint Slides-Available for each chapter, PowerPoint lecture slides highlight key mat- ter from each chapter.

Solutions Manual-Includes solutions to all end-of-chapter review questions, exercises, and case studies.

Now You Try Responses-Available to instructors, solutions to the Now You Try exer- cises are intended to assist instructors in leading class discussions.

~ : A web-based learning and assessment program intended to complement your textbook and classroom instruction. This easy-to-use course management system includes prac- tice quizzes and guided examples videos narrated by the author. MyBusinessCourse provides students with additional help when you are not available. MyBusinessCourse is ideal for online courses or traditional face-to-face courses for which you want to offer students more resources to succeed.

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ACKNOWLEDGEMENTS I would like to first thank Denny Beresford, for his enthusiastic initial, and continuing, support of this book.

We were fortunate to receive review comments on this book from accounting research fac- ulty from across the country, and we are sincerely grateful to these individuals for their time and important contributions to this book. These individuals are

Sheila Ammons, Austin Community College Marie Archambault, Marshall University Salem Boumediene, Montana State University Megan Burke, Texas A&M University-Commerce Kimberly Charland, Kansas State University Yu Chen, Texas A&M International University Mary Christ, University of Northern Iowa Ann Cohen, SUNY-Buffalo Amanda Cromartie, University of North

Carolina-Greensboro John Crowley, Castleton State College Abbie Daly, University of Wisconsin- White Water John DeJoy, Union Graduate College Victoria Dickinson, University of Mississippi Lynn Dikolli, University of North Carolina at Chapel

Hill Tom Downen, University of North

Carolina-Wilmington Emily Doyle, University of South Carolina Robert Elya, Golden Gate University Patricia Fairfield, Georgetown University Tim Firch, California State University-Stanislaus Michael Fischer, St. Bonaventure University Caroline Ford, Baylor University James Fornaro, SUNY at Old Westbury Jim Fuehrmeyer, University of Notre Dame Carl Gabrini, College of Coastal Georgia Catherine Gaharan, Midwestern State University Patricia Galleta, CUNY-College of Staten Island Alan Glazer, Franklin & Marshall College Hubert Glover, Drexel University Rita Grant, Grand Valley State University Mahendra Gujarathi , Bentley University Parveen Gupta, Lehigh University Leslie Hodder, Indiana University Patrick Hopkins, Indiana University Ron Huefner, SUNY-Buffalo Venkataraman Iyer, University of North

Carolina-Greensboro Mark Jackson, University of Nevada-Reno Carol Jessup, University of Illinois-Springfield John Jiang, Michigan State University

Vicki Jobst, Benedictine University Jeff Jones, Auburn Universi ty (Amanda) Bree Josefy, Indiana University Ahmad Jumah, University of Illinois-Springfield Sara Kern, Gonzaga University Katherine Krawczyk, North Carolina State University Sudha Krishnan, California State University-Long

Beach Benjamin Lansford, Penn State University Siyi Li, University of Illinois-Chicago Linda Lovata, Southern Illinois

University-Edwardsville Jason MacGregor, Baylor University Dawn Massey, Fairfield University Dawn McKinley, Harper College Janet Mosebach, University of Toledo Kelly Noe, Stephen F. Austin State University Elizabeth Oliver, Washington & Lee University Kevin Packard, Brigham Young University-Idaho Susan Parker, Santa Clara University Laurel Parrilli, St. John Fisher College Terry Patton , Midwestern State University Suzanne Perry, Texas A & M University-Commerce Marlene Plumlee, University of Utah Richard Price, Utah State University K.K. Raman, University of Texas, San Antonio Paul Recupero, Newbury College Phil Rohrbach, University of Richmond John Rossi , Moravian College Beverly Rowe, University of Houston Downtown Carol Sargent, Middle Georgia State University Lee Schiffel, Valparaiso University Barbara Scofield, Washburn University Debra Sinclair, University of South Florida Kevin Smith, Utah Valley University Chad Stefaniak, University of South Carolina Randall Stone, East Central University Ronald Stunda, Valdosta State University Walter Teets , Gonzaga University Thomas Vogel, Canisius College Robert Walsh, University of Dallas Changjiang Wang, Florida International Uni versity

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Christine Wayne, Harper College Jeannie Welsh, LaSalle University

Philip Woodlief, Vanderbilt University Gail Wright, York College of Pennsylvania Rong Yang, Rochester Institute of Technology Jeff Wilks, Brigham Young University

John Williams, Missouri State University

In particular, thanks to Sheila Ammons, Lynn Dikolli, Tim Firch, Jim Fornaro, Jim Fuehrmeyer, Richard Grueter, Carol Jessup, Sara Kern, Elizabeth Oliver, Debbie Sinclair, Nicholas Stell, Keith Stolzenburg, Jeff Wilks, and Phil Woodlief for their valuable feedback and counsel on the development of this text. Thanks, too, to our colleagues and former colleagues at the University at Buffalo for their support of this text, especially Ron Huefner, Ann Cohen, Arlene Hibschweiler, and Susan Hamlen.

A sincere thanks to the many institutions and corporations that permitted the use of their material in this book, especially the generosity of the Financial Accounting Foundation, PCAOB, and AICPA.

I would also like to thank George Werthman and Marnee Fieldman at Cambridge Business Publishers for their dedication to this book.

Finally, thank you to the instructors, students, and firms using this book. I look forward to your comments and suggestions.

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Chapter 1 Overview of Accounting Research 2

Chapter 2 The FASB Codification: Introduction and Search Strategies 20

Chapter 3 The Research Process 54

Chapter 4 Creating Effective Documentation 76

Chapter 5 Using Nonauthoritative Sources to Supplement Codification Research 11 O

Chapter 6 Scope and Recognition Guidance: A Brief Introduction 146

Chapter 7 Using the Codification to Research Measurement Issues 184

Chapter 8 Fair Value Measurements in the Codification 208

Chapter 9 Audit and Professional Services Research 236

Chapter 10 Governmental Accounting Research 274

Chapter 11 Fundamentals of Tax Research 308

Chapter 12 The International Research Environment 352

Chapter 13 Delivering Effective Presentations 392

Chapter 14 Staying Current with Emerging Guidance 408

Index 421

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Contents

Target Audience v

Prerequisites for Users of this Book vi

Outstanding Features of this Book vi

Overview of the Book vi

Engaging Pedagogy vii

New To This Edition x

Supplements x

Acknowledgements xi

Chapter 1 Overview of Accounting Research 2

Why Accounting Research Skills Matter 4

What Is Accounting Research, and Why Is It Performed? 4

In What Future Roles Might I Perform Accounting Research? 5

When Is Accounting Research Performed? 6

Researching a Proposed Transaction 7

Researching a Past Transaction 8

Research Performed After Financial Statement Issuance 9

Research for the Purpose of Shaping Future Accounting Standards 10

In What Environments Is Accounting Research Performed? 10

Different Guidance for Each Research Environment 11

Accounting Standard-Setting Bodies 12

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The Securities and Exchange Commission 12

The American Institute of Certified Public Accountants 14

The Financial Accounting Standards Board 14

Chapter Summary 16

Review Questions 16

Exercises 17

Case Study Questions 18

Chapter 2 The FASB Codification: Introduction and Search Strategies 20

What is the FASS Codification? 22

What Sources of Guidance Were Used to Populate the Codification? 23

How is the Codification Updated? 24

Navigating The Codification 24

How is Information Organized Within the Codification? 25

Areas and Topics 26

Subtopics 28

Sections 28

Subsections and Paragraphs 33

Tips for Performing Browse Searches 35

Join All Sections 35

Navigating a Subtopic, Considering All Areas of “Required Reading” 36

Other Search Methods 39

Keyword Searches 39

Search by ASC Reference Number 43

Cross Reference Tab 44

Master Glossary 44

Pending Content and Effective Dates 45

What is “Pending Content”? 45

Understanding Effective Dates 46

Private Company Accounting Alternatives in the Codification 47

Chapter Summary 47

Review Questions 47

Exercises 49

Case Study Questions 50

Chapter 3 The Research Process 54

Why Use A Research Process? 56

The Accounting Research Process 56

Pre-Step: Understand the Business (Industry) 57

Step 1: Understand the Facts/Background of the Transaction 59

Step 2: Define the Problem. That Is, Identify the “Researchable Question .” 61

Step 3: Stop and Think: What Accounting Treatment Will Likely Be Appropriate? 62

Step 4: Search Potentially Relevant Sources of Guidance, Copying Any Relevant Guidance into a Word Document 63

Step 5: Analyze Alternatives, Documenting Your Consideration of Each 65

Step 6: Justify and Document Your Conclusion 67

Judgment And Decision Making- A Brief Introduction 67

Chapter Summary 70

Review Questions 71

Exercises 71

Case Study Questions 73

Additional References 75

Chapter 4 Creating Effective Documentation 76

Documentation Is Integral to Accounting Research 78

Communicating Accounting Research 79

Emailing the Results of Research Questions 79

Drafting an Accounting Issues Memorandum 83

Facts 84

lssue(s) 86

Analysis 86

Conclusion 91

Contents xv

Financial Statement and Disclosure Impacts 93

Reread Your Work Before Submitting (and what to look for) 93

Properly Referencing Accounting Guidance 94

How Do I Reference a Passage from the Codification? 94

Should I Ever Use Footnotes in Professional Memos? 95

When Should I Use Quotation Marks? 96

When Is It Appropriate to Alter an Excerpt from the Guidance? 96

When Is It Appropriate to Use Ellipses? 97

Style Tips for Professional Communication 98

Use Proper Voice in Your Memos 98

Keep Your Language Neutral (Avoid Strong Words) 98

Get the Grammar Right 99

Getting Feedback On Your Writing 100

Chapter 4 Appendix 101

Sample Accounting Issues Memo 101

Chapter Summary 105

Review Questions 105

Exercises 106

Case Study Questions 108

Chapter 5 Using Nonauthoritative Sources to Supplement Codification Research 110

Nonauthoritative Guidance: What Is It, And How Is It Used? 112

Benefits of Nonauthoritative Guidance 113

Sources of Nonauthoritative Guidance 114

FASB’s Conceptual Framework 114

Accounting Standards Updates and Pre-Codification Standards 123

Accounting Firm Resources 125

AICPA Resources 130

Peer Benchmarking 132

International Financial Reporting Standards (IFRS) 136

Using Nonauthoritative Sources: There’s a Right Way, and a Wrong Way 138

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Is It Wrong to Cite Nonauthoritative Guidance Only? 140

What’s the Right Way to Search Nonauthoritative Guidance? 140

How Do I Reference Nonauthoritative Sources? 141

Chapter Summary 141

Review Questions 142

Exercises 142

Case Study Questions 144

Chapter 6 Scope and Recognition Guidance: A Brief Introduction 146

Scope Guidance: An Area Of Required Reading 148

Applying Scope Guidance: A Few Examples 149

Considering Scope, Glossary, and Interpretive Guidance 149

Evaluating Subsections with Unique Scope Guidance: Nonmonetary Transactions 151

Which Topic Applies?: Navigating Investments Topics 154

Performing A Scope Test: Derivatives 156

Evaluating Whether an Instrument Meets the Definition of a Derivative 156

To Document, or Not to Document My Scope Review? 158

Recognition Guidance: A Brief Introduction 159

Revenue Recognition: Navigating The REVISED MODEL 161

Conceptual Definitions of Revenue 161

Revised Model: Revenue from Contracts with Customers (ASC 606) 162

Research Techniques for Navigating Revenue Guidance 163

Applying Different Recognition Thresholds 171

Uncertain Taxes: Recognize If More Likely Than Not 171

Effective Settlement of a Tax Position 172

Subsequent Events: Recognize If Conditions Existed at the Balance Sheet Date 17 4

Applying Derecognition Guidance: Liability Extinguishments 176

Chapter Summary 179

Review Questions 179

Exercises 180

Case Study Questions 181

Chapter 7 Using the Codification to Research Measurement Issues 184

What is Accounting Measurement? 186

Overview and Conceptual Background 186

Measurement Attributes 186

Where Can I Find Measurement Guidance? 188

Who Performs Accounting Measurement In Practice? 190

Initial Measurements 190

Overview 190

Applying Initial Measurement Guidance 191

Subsequent Measurements 197

Overview 197

Applying Subsequent Measurement Guidance 197

Disclosure Should Accompany Key Measurement Judgments 203

Chapter Summary 203

Review Questions 203

Exercises 204

Case Study Questions 205

Chapter 8 Fair Value Measurements in the Codification 208

Fair Value Overview 210

What Is Measured at Fair Value? 210

How Is Fair Value Measured? 211

The Fair Value Hierarchy 212

The Debits and Credits: How Are Changes in Fair Value Reported? 214

How Do I Navigate Fair Value Guidance? 215

Organization of ASC 820 216

In What Other Circumstances Are Fair Value Measurements Permitted Or Required? 217

Option to Measure at Fair Value 217

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Items Measured at Fair Value for Disclosure Purposes 219

What Is The Relationship Between Fair Value and Present Value? 221

Contributions Payable: Measuring Fair Value Using an Income Approach 222

Valuation Technique Disclosures: An Insight Into How Fair Value Measurements Are Performed 224

Fixed Assets : Testing For Impairment Using Fair Value 225

Chapter Summary 231

Review Questions 231

Exercises 232

Case Study Questions 233

Chapter 9 Audit and Professional Services Research 236

Introduction To Auditing Research 238

When Is Audit Research Required? 238

Types of Services-A High-Level Overview 238

The Standard Setters: The AICPA and the PCAOB 239

Researching Auditing Standards 242

AICPA Auditing Standards 242

PCAOB Rules and Auditing Standards 247

Searching for Auditing Guidance within Firm Research Databases 254

The AICPA’s Code Of Conduct 255

The Code Is Organized Into Three Parts 255

The Conceptual Framework Approach 258

How Is Guidance in the Code Organized? 261

How Can I Search for Guidance in the Code? 265

The Code Will Continue to Change 266

Standards For Other Professional Services 266

Attestation Standards 266

Compilation and Review Standards (SSARS) 266

Internal Audit Standards 267

Documentation of Professional Services Research 268

Citing Professional Standards 269

Chapter Summary 270

Review Questions 270

Exercises 271

Case Study Questions 272

Chapter 10 Governmental Accounting Research 27 4

Conten ts xvii

Governmental Accounting Research 276

State and Local Accounting Standards 276

Federal Accounting Standards 286

Referencing Governmental Accounting Guidance 291

Governmental Auditing Standards 291

In What Circumstances Are Government Audits Required? 291

Who Performs Government Audits? 293

Standards for Government Audits 294

Applying Governmental Auditing Standards 297

Appendix 1 OA : Applying the GASB Codification , An Extended Example 300

Recognition of Tax Revenues , Using Fund Accounting 300

Chapter Summary 304

Review Questions 304

Exercises 305

Case Study Questions 306

Chapter 11 Fundamentals of Tax Research 308

Who Performs Tax Research , and When? 310

The Tax Research Process 31 O

Step 1: Understand the Relevant Facts 311

Step 2: Identify the Tax Issues Involved 312

Step 3: Analyze Tax Research Findings 314

Step 4: Document and Communicate Tax Research Results 315

Sources of Federal Tax Law 318

Primary Sources of U.S. Federal Tax Law 318

Secondary Sources of U.S. Federal Tax Law 334

Using an Online Tax Research Service to Find Tax Law 336

Table of Contents and Index Searches on Thomson Reuters Checkpoint 337

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Keyword Searching 338

Citation Searches 340

Additional Guidance for Using Thomson Reuters Checkpoint 340

Updating Tax Research Results 341

Citators 342

Standards of Professional Tax Practice 344

Circular 230 344

AICPA Statements on Standards for Tax Services 345

Chapter Summary 346

Review Questions 346

Exercises 347

Case Study Questions 349

Chapter 12 The International Research Environment 352

Introduction 354

IFRS: The Predominant Global Financial Reporting Framework 354

A Brief History of International Standards 354

When Are Financial Statements Required Internationally? 355

The IFRS Foundation and Its Standard-Setting Bodies 357

Standard-Setting Bodies of the IFRS Foundation 358

Governance and Oversight of the IFRS Foundation 359

Advisory Bodies of the IFRS Foundation 360

Funding for the IFRS Foundation 361

International Financial Reporting Standards (IFRS) 361

Applicability of IFRS 361

Understanding “Full IFRS” 364

Performing IFRS Research 368

Statement of Compliance with IFRS 372

IFRS for Small and Medium-Sized Entities 373

How Do I Know Whether IFRS Applies to a Particular Country? 375

When Are International Standards Relevant to U.S. Accountants? 376

Foreign Private Issuers 377

U.S. Nonpublic Companies 378

Other Areas Relevant to U.S. Accountants 378

Citing International Accounting Standards 379

Nonauthoritative Resources 380

Deloitte’s IAS Plus Website 380

Comparison Guides 380

Other Resources 380

Appendix 12A: International Auditing Standards 381

When Do International Auditing Standards Apply? 381

The International Federation of Accountants (IFAC) and Its Standards Boards 382

Comparing International Audit Reports 385

Chapter Summary 387

Review Questions 387

Exercises 388

Case Study Questions 389

Additional References 390

Chapter 13 Delivering Effective Presentations 392

When Will I Use Presentation Skills in Practice , and What Is the Format? 394

Presentation Formats 395

What Are the Qualities of a Great Presentation? 395

Creating Effective Content 396

Find Ways to Make the Information Resonate 397

How Much Detail Should I Include in My Slides? 398

Does Font Choice Matter? 400

Use Consistent Bullet Style 400

Edit Your Presentation 401

Delivering a High-Quality Presentation 401

Tips for Powerful Body Language 401

What If You Have a Fear of Presenting? 403

Think beyond the Case Facts 403

What Should You Wear? 404

Considerations for Those Working in a Group 404

Chapter Summary 406

Review Questions 406

Exercises 407

Case Study Questions 407

Chapter 14 Staying Current with Emerging Guidance 408

The Professional Advantages of Staying Current 410

The Standard-Setting Process 411

Why Do Accounting Standards Change? 411

Contents xix

The Standard-Setting “Due Process” 412

Identifying Resources for Staying Current 413

First, Identify the Standard Setters You Want to Monitor 413

Next, Identify Resources for Monitoring These Standard Setters 414

Chapter Summary 418

Review Questions 418

Exercises 419

Case Study Questions 420

Index 421

2

Overview of Accounting Research Each chapter in this book begins with an opening scenario , involving a beginning researcher

who has been challenged to perform research. The opening scenario for this chapter is

about you.

You are a senior or graduate-level accounting student, or you are an associate in an

accounting firm . Your coursework and experiences to date have given you a strong account-

ing foundation ; however, now you are being asked to perform accounting research. As an

accounting student, you are told that you’ll need research skills for your upper-level course-

work and for the CPA exam. Or, as a professional , your supervisor is already asking for your

help researching client issues.

To perform this research , you will need the following :

• An understanding of which research tools apply in each research environment,

• Confidence applying a step-by-step research process to open-ended questions, and

• Strong written communication skills , to effectively communicate your research

results.

Continued

After reading this chapter and performing the exercises herein, you will be able to

1. Identify parties who perform accounting research , and circumstances in which

accounting research is required .

2. Describe the ideal timing for performing accounting research , and understand circum-

stances in which this timing may not be feasible .

3. Understand that different standards apply to different research environments (e.g. ,

financial , governmental , audit, tax, and international research).

4. Identify key standard setters involved in establishing U.S. accounting guidance.

��

Continued from previous page

You’ve come to the right place to obtain these skills. By actively participating in the les-

sons in this book, and by practicing your skills through research exercises and case stud-

ies, you can become an effective researcher. Get ready to roll up your sleeves-the ability

to perform accounting research can pay dividends for your career, but mastering this skill

requires practice.

Why Do Sources of Guidance Brief Introduction to Accounting Research Applicable to Different Accounting Standard

Skills Matter? Research Environments Setters

1. Why is accounting 1. Accounting (public vs . 1. SEC research performed? private companies) 2. AICPA

2. In what future roles 2. International 3. FASB might I perform 3. Governmental research ?

4. Tax, and 3. When is research

5. Auditing research. performed?

Organization of This Chapter This chapter provides essential background for researchers about to engage in their first

experiences with the FASB Codification (in Chapter 2). In particular, the chapter emphasizes

the importance of research skills and circumstances in which these skills may be required .

Additionally, the chapter emphasizes the benefits of researching transactions before they

take place.

Next, the chapter highlights that accounting research doesn’t just come from one source ;

rather, each accounting environment (U.S. , international , tax, governmental , and auditing)

is governed by its own unique standards. Finally, the chapter introduces the key standard

setters responsible for establishing U.S. generally accepted accounting principles (GAAP).

The preceding graphic illustrates the organization of this chapter.

Following the introduction presented in this chapter, Chapters 2-8 of this book focus on

various aspects of financial accounting research , primarily related to U.S. public and non-

public companies. Discussion of other research environments , including guidance on audit-

ing, governmental , tax, and international research , is provided in Chapters 9-12 . Chapter 13

offers techniques for delivering effective research presentations. Finally, Chapter 14 teaches

readers the importance of staying current as accounting standards continually change.

3

/’0

���

4 Chapter l I Overview of Accounting Research © Cambridge Business Publishers

Lo 1 Identify parties who perform accounting research, and cir- cumstances in which account- ing research is required.

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