ACCT 3110 1st Edition Lecture 1Outline of Last Lecture I. Intro to the SyllabusOutline of Current Lecture II. Intro to Financial AccountingIII. USGAAP vs. IFRSIV. FASB’s CodificationV. SEC and Sarbanes-OxleyCurrent LectureImportance of Reliable Accounting- For managers to make decisions about business- Important for international markets, banks, and investorso All banks require annual audited financial infoo Creditors want to see financial statements because they don’t want to lose moneyo Potential investors want to see what they are investing inObjectives of Financial Reporting- To provide financial information about the company for the use of present and potential equity investors, lenders, and creditorsEconomic Entity Principle: Financial reports are prepared about the business, not its owners (separates business from owners)Top Four Accounting Firms1. PricewaterhouseCoopers2. Ernst & Young3. KPMG4. Deloitte Financial accounting is for external use, managerial accounting is for internal useThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Parts of a Financial Statement1. Balance Sheet- specific point of time of what we have, what we owe, and equity2. Income Statement- statement of operations3. Cash Flow Statement4. Statement of Stockholder’s equity(Use different degrees of precision based on what month because certain months require statements sent to SEC)IFRS- Accounting system used by all foreign countries- Does not always use accrual basis- Principles based, requires individual judgmentUSGAAP- Accounting system used by US- Uses accrual basis (Recognizes revenue when earned)- Rules based- Includes FASB’s Codification (authoritative) and other non-authoritative guidesFASB’s Codification- Purpose is to simplify GAAP and provide one place to go for all rules- FASB is the only group that can change codification (Accounting Standards Updates)- Financial Accounting Concepts Statements: Conceptual framework for Codification- For new codes, FASB takes public input, often takes 2-3 years or more to get it passedSEC: regulates annual financial reporting, but only for public companiesExchange Act of 1934: Created the SECSarbanes-Oxley Act Regulations- Created PCAOB (Public Company Accounting Oversight Board), establishes accounting standards- Stronger independence rules for auditors (every 5 years a company gets a new auditor so they don’t become “pals”)- CEOs and CFOs must sign off on financial