Jaime Huamani Accounting 301-Section 01 Professor Gary Skiba 16 January 2013

CA1-15 (Rule-Making Issues) What, if any, is the ethical issue involved in this case? A. The ethical issue would be the early implementation that would result in a fairer presentation of the companys financial condition and earnings. Is the financial vice president acting improperly or immorally? B. I would believe that there is nothing wrong because the mandatory implementation is not due. Nor is the financial vice president acting improperly because he is looking out for the company by prohibiting the early implementation affecting the reported net income for the year. The VP might be acting immorally only if his personal bonus would be connected with the companys earnings since he is trying to discourage Weller from implementing the rule. What does Weller have to gain by advocacy of early implementation? C. Since Weller is the controller and by advocating early implementation, she is following her responsibility in providing financial information that would represent the state of the company. Which stakeholders might be affected by the decision against early implementation? D. Well the stakeholders that might be affected would be the lenders and investors because those are the groups who read the financial statements and rely on the financial condition of the company but they are the most to gain by early implementation. Financial Reporting Problem Help Beverly by identifying key organizations involved in according rule-making. A. The key organizations involved in accounting rule-making are user groups such as accounting firms, AICPA, government agencies, investing public, industry associations. These are the user groups who target the FASB, to pressure it to influence changes in the existing rules and the development of new ones toward the GAAP.

Beverly asks for guidance regarding authoritative support. Please assist her by explaining what is meant by authoritative support. B. Authoritative support is when the FASBs primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. This will simplify user access to all authoritative US generally accepted accounting principles. In all, the codification integrates and synthesizes existing GAAP; it does not create new GAAP. This would create one level of GAAP, which is considered authoritative. Give Beverly a historical overview of how rule-making has evolved so that she will not feel that she is the only one to be confused. C. An example of a historical overview of how rule-making has evolved is when in 2009 Congress ordered the FASB to change its accounting rules so as to reduce the losses banks reported, as the values of their securities had crumbled. Since now the most effective way to influence GAAP is to participate in the formulation of these rules or try to influence or persuade the formulator of them. What authority for compliance with GAAP has existed throughout the history of rulemaking? D. The authority for compliance has to be the FASB because it has been with the GAAP throughout the history of rule-making. Since users groups often target the FASB to apply new rules toward the GAAP.