ACCT 3040

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Case/Simulation #1 (CS#1)
ACCT 3040
Name________________________
This is a Case/Simulation Assignment. You must complete this without the help of your
peers. Review the Academic Integrity rules in your syllabus for this type of graded
assignment.
PROBLEM 1
Topic 1 for our course should be a review for most students enrolled in this course. The
Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Concepts (CON) No. 8 in December 2021.
READ the introduction to CON8 and paragraphs OB1 – OB21 in CON8 Chapter 1. You will
find Non-Authoritative Concepts Statements at www.fasb.org under the Standards tab at the top
of the page.
ANSWER the following questions based on your reading of the above parts of CON8. If you
use sentences or phrases verbatim (word-for-word) from CON8, make sure you put these quotes
in quotation marks so that you are not representing FASB’s words as your own.
1) What is the Conceptual Framework?
2) Who is “likely to be the most direct beneficiary of the guidance provided by Concepts
Statements”?
3) Are the Concepts Statements considered authoritative accounting literature? In other words,
are the Concepts Statements part of generally accepted accounting principles (GAAP)?
4) Name the document in which one would find U.S. GAAP.
5) State the objective of financial reporting, and identify the paragraph in which you found this
objective statement.
6) “To assess an entity’s prospects for future net cash inflows,” what are the three items about
which FASB says information is needed?
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7) Answer Yes or No. Are general purpose financial reports designed to show a reporting
entity’s value?
8) Who are the primary users of general purpose financial reports?
9) Name two groups that are not considered by FASB to be primary users of general purpose
financial reports.
10) What is represented in information about a reporting entity’s financial position?
11) What type of accounting best reflects “financial performance”?
PROBLEM 2
Use Statement of Financial Accounting Concepts (CON) No. 5, Recognition and Measurement
in Financial Statements of Business Enterprises (as amended) to answer the following questions.
You will not need to read the entire CON5 for this problem.
1) Define “recognition,” and state the paragraph number in which “recognition” is defined.
This means you can’t just use the Highlights at the beginning of the CON5 document to
answer this item.
2) Read CON5, pars. 58 – 70. Prior to CON8, the Conceptual Framework identified relevance
and reliability as the two primary (or fundamental) qualitative characteristics of useful
financial information. The FASB is in the process of amending CON5 so that it is consistent
with the new concepts in CON8.
a) List the first two (of four) fundamental recognition criteria.
b) “Measurability” involves two things: a relevant (measurement) attribute and
sufficiently reliable measurement. List the 5 measurement attributes discussed in
CON5, par. 67, and provide one example of an asset or liability for which each
attribute is used in current practice.
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PROBLEM 3
Access the FASB Accounting Standards Codification (ASC) at www.fasb.org. Click the tab:
Accounting Standards Codification.
1) Answer the following questions.
a) From “About the Codification” document, list the four levels of outline structure by
which the FASB ASC is organized.
b) What is the Topic number for Receivables?
c) How many digits are in a Topic Code? (For example, 23 is a 2-digit number.)
d) How many digits are in a Subtopic Code?
e) Sections have the same numbers in every Subtopic in the ASC. What is the Section
number for Recognition?
f) We will be using a Number-Based Citation Style that reflects the outline structure to the
paragraph level. FASB provides the following sample reference on page 49: FASB ASC
paragraph 840-10-25-1. Which outline levels do each of the numbers in this reference
represent?
___________ 840
___________ 10
___________ 25
___________ 1
PROBLEM 4
Access the FASB Accounting Standards Codification (ASC) at www.fasb.org. Click the tab:
Accounting Standards Codification.
1) Using the Master Glossary, find the definition for “financing activities.”
a. Quote this definition here:
b. From the Master Glossary, list the Topic number in which Financing Activities is
used.
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c. Name the “area” in which the Topic number you listed above is found in FASB ASC.
2) Go to FASB ASC subtopic 230-10.
a. What is the primary objective of a statement of cash flows? If you directly quote from
FASB ASC, then make sure you use quotation marks around your answer.
b. Provide a proper citation for your answer to part 1 above. This citation should be at
the paragraph level.
c. Section 50 in the FASB ASC is always about Disclosure requirements. List the three
items addressed in FASB ASC section 230-10-50 that are required disclosures related
to the statement of cash flows.
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