You don’t need to write anything in your own words, just copy and paste the information that you found from the cite attached.
I. FASB Accounting Standards Codification (FASC)
This section deals with certain general background considerations and information related to the FASC and the answers can be found by clicking the “About the Codification” and “Notice to Constituents” sections on the FASC Welcome Page. This section is a good general source of information about the FASC and should be reviewed prior to starting to answer the specific questions set forth in all sections. The related research questions that you must answer are:
(a) When did the FASC Codification become effective?
(b) Did the FASC change prior GAAP?
(c) What does the FASB expect from the new FASC structure and system?
(d) What are the “topics” used in the ASC?
(e) Are Securities and Exchange Commission (SEC) references included in the ASC?
II. Topic-Specific Research
You have been hired at an audit firm as a first year staff. This firm requires that all references to generally accepted accounting principles in the audit workpapers include the corresponding FASC citation (topic and subtopics). Below are three independent situations found at your clients that require research and documentation.
For each question, (1) provide the citation number (topic and subtopic) that addresses the question and (2) answer the question. Document this under the question, indenting your answer.
1. Transfer of Receivables
Your client transferred receivables this fiscal year. Discuss the authoritative literature for the following items that are discussed in the securitization agreement.
(a) Identify the primary authoritative guidance for the accounting for transfers of receivables.
(b) Provide definitions for the following:
(i) Transfer
(ii) Recourse
(iii) Collateral
(c) Provide other examples (besides recourse and collateral) that qualify as continuing involvement.
2. Comprehensive Income
Your client owns a large portfolio of varied investments. You are auditing the valuation of the investment balances, including derivatives, and will later review the classification of those investments in the financial statements. You would like to better understand how investments classified as available-for-sale and derivatives are accounted for and disclosed and as such will research how comprehensive income is reported.
(a) Identify the primary authoritative guidance for comprehensive income reporting.
(b) Provide the definition of comprehensive income.
(c) Define classifications within other comprehensive income and give examples.
(d) What are reclassification adjustments?
3. Income Taxes
Kleckner Company started operations in 2010. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2014), Kleckner appears to have turned the corner and reported modest taxable income of $30,000. In addition to a deferred tax asset related to its net operating loss, Kleckner has recorded a deferred tax asset related to product warranties and a deferred tax liability related to accelerated depreciation.
Given its past operating results, Kleckner has established a full valuation allowance for its deferred tax assets. However, given its improved performance, Kleckner management wonders whether the company can now reduce or eliminate the valuation allowance. They would like you to conduct some research on the accounting for its valuation allowance.
(a) Identify the primary authoritative guidance that addresses valuation allowance requirements.
(b) Briefly explain to Kleckner management the importance of future taxable income as it relates to the valuation allowance for deferred tax assets.
(c) What are the sources of income that may be relied upon to remove the need for a valuation allowance?
(d) What are tax-planning strategies? From the information provided, does it appear that Kleckner could employ a tax-planning strategy to support reducing its valuation allowance?
You can access the Financial Accounting Standards Board (FASB) Financial Accounting Standards Codification database at: http://aaahq.org/ascLogin.cfm. Type in the following:
Username: AAA52092
Password: JfG8V7c
