MODUL-5

Financial Accounting

Financial Accounting &

Accounting StandardBy

MUH. ARIEF EFFENDI,SE,MSI,AK,QIA

Magister Accounting Program (MAKSI)

BUDI LUHUR UNIVERSITY

Jakarta - Indonesia

2010

Financial Accounting &

Accounting Standard

1. Understand the Basic of the Financial Accounting & Accounting Standard.

2. Understand the Usefullness of the Financial Accounting Standard.

3. List the objective of Financial Accounting .

4. Explain the Need to Develop Standard.

5. Understand the United States of General Accepted Accounting Principles (US

GAAP).

6. Understand the International Accounting Standard (IAS).

7. Understand the International Financial Reporting Standard (IFRS)

8. Understand the Govermental Accounting Standard (GAS).

9. Understand the adopted of IFRS in Indonesian GAAP (PSAK).

10. Understand the benefits of Convergence to IFRS.

After studying this topic, students should be able to:

1. Securities and

Exchange

Commission

2. American Institute of

CPAs

3. Financial Accounting

Standards Board

4. Changing role of the

AICPA

Financial

Statements and

Financial

Reporting

Parties Involved

in Standard

Setting

Generally

Accepted

Accounting

Principles

Issues in

Financial

Reporting

1. Accounting and

capital allocation

2. Challenges

3. Objectives

4. Need to develop

standards

1. FASB Codification 1. Political

environment

2. Expectations gap

3. International

accounting

standards

4. Ethics

Financial Accounting and Accounting Standards

Financial Accounting & Accounting

Standard : The Basic

Essential characteristics of accounting are:

1. the identification, measurement, and communication of financial information about

2. economic entities to

3. interested parties.

Financial Statements & Financial Reporting

Financial Accounting & Accounting

Standard : The Basic

Financial Information

-----------

Accounting?

--------------

Identifies

and

Measures

and

Communicates

Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Owners’ or Stockholders’ Equity

Note Disclosures

President’s letter

Prospectuses,

SEC Reporting

News releases

Forecasts

Environmental Reports

Etc.

GAAP Not GAAP

Financial Statements Additional InformationEconomic Entity

Financial Statement &

Financial Reporting

Financial reporting should provide information that :

1. is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.

2. helps present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts.

3. clearly portrays the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events, and circumstances that change its resources and claims to those resources.

Objective of Financial Accounting

Various users need financial information

The accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced.

Financial StatementsBalance SheetIncome StatementStatement of Stockholders’ EquityStatement of Cash FlowsNote Disclosure

Generally Accepted

Accounting Principles

(GAAP)

Need To Develop Standard

Wheat Committee’s recommendations resulted in the creation of a the

Financial Accounting Standards Board (FASB) in 1973.

Financial Accounting Foundation (FAF)

o Selects members of the FASB o Funds their activities o Exercises general oversight.

Financial Accounting Standards Board (FASB)

Financial Accounting Standards Advisory Council (FASAC)

o Mission to establish and improve standards of financial accounting and reporting.

o Consult on major policy issues.

Financial Accounting Standard Boards (FASB)

Missions is to establish and improve standards of

financial accounting and reporting. Differences

between FASB and APB include:

Smaller Membership

Full-time, Remunerated Membership

Greater Autonomy

Increased Independence

Broader Representationhttp://www.fasb.org/

Financial Accounting Standard Boards (FASB)

FASB Preparers (e.g., FEI)

Financial Community

Government (SEC, IRS,

other agencies)

Industry Associations

Business Entities

CPAs and

Accounting Firms

AICPA (AcSEC)

Academicians

Investing Public

Accounting standards, interpretations, and bulletins

Standard SettingUser Groups that Influence Accounting Standards

Source : Kieso, Weygandt & Warfield, Intermediate Accounting, John Wiley & Sons, Inc, 13th Ed, 2009

Financial Accounting Standard Boards (FASB)

FASB relies on two basic premises:

(1) Responsive to entire economic community

(2) Operate in full view of the public

Due Process

Step 1 = Topic placed on agenda

Step 2 = Research conducted and Discussion Memorandum issued.

Step 3 = Public hearing

Step 4 = Board evaluates research, public response and issues

Exposure Draft

Step 5 = Board evaluates responses and issues final Statement of

Financial Accounting Standard

Source : Kieso, Weygandt & Warfield, Intermediate Accounting, John Wiley & Sons, Inc, 13th Ed, 2009

Financial Accounting Standard Boards (FASB)

Issued by the FASB :

Types of Pronouncements

1. Standards, Interpretations, and Staff Positions.

2. Financial Accounting Concepts

3. Emerging Issues Task Force Statements

Source : Kieso, Weygandt & Warfield, Intermediate Accounting, John Wiley & Sons, Inc, 13th Ed, 2009

Financial Accounting Standard Boards (FASB)

Two sets of standards accepted for international use:

1. U.S. GAAP, issued by the FASB.

2. International Financial Reporting Standards

(IFRS), issued by the IASB.

FASB and IASB recognize that

global markets will best be

served if only one set of GAAP

is used.

Issues in Financial Reporting :International Accounting Standards (IAS)

National professional organization in USA :

Committee on Accounting

Procedures (CAP)

Accounting Principles Board (APB)

1939 to 1959

Issued 51

Accounting

Research Bulletins

(ARBs)

Problem-by-problem

approach failed

1959 to 1973

Issued 31 Accounting

Principle Board

Opinions (APBOs)

Wheat Committee

recommendations

adopted in 1973

The American Institute of Certified

Public Accountants (AICPA)

The AICPA established the Accounting Standards Executive

Committee (AcSEC):

1. Audit and Accounting Guides

2. Statements of Position (SOP)

3. Practice Bulletins

Changing Role of AICPA

AICPA and AcSEC no longer issues authoritative accounting

guidance for public companies.

PCAOB oversees the development of auditing standards.

AICPA continues to develop and grade the CPA examination.

The American Institute of Certified

Public Accountants (AICPA)

General Accepted Accounting Principles (GAAP)

GAAP Documents

FASB Statements, Interpretations, and Staff

PositionsAPB Opinions CAP Accounting

Research Bulletins

Category A (Most Authoritative)

FASB Technical Bulletins

AICPA Industry Audit and Accounting Guides

AICPA Statements of Position

Category B

FASB Emerging Issues Task Force AICPA AcSEC Practice Bulletins

Category C

AICPA Accounting Interpretations

Category D (Least Authoritative)

FASB Implementation Guides

Recognized Industry Practices

House of General Accepted

Accounting Principles (GAAP)

International Accounting Standard (IAS)

Produced by International Accounting Standard

Commissions (IASC).

I A S C

o set up in 1973.

o works for improvement and harmonisation of

financial reporting.

o develops IAS s through an international process,

involving :1. world-wide accounting profession,

2. preparers and users of financial statements

3. national standard setting bodies

International Accounting Standards (IAS) :History

1. 1973 International Accounting Standards Committee (IASC) founded by 10 national accountancy organisations.

2. 1981 All members of IFAC became members of IASC.

3. 1999 100+ countries. Structure reviewed.

4. 2001 International Accounting Standards Board (IASB) began operations.

5. 2005 Europe, Australia, 90+ countries adopting IFRS

International Accounting Standard

Commissions (IASC) : Objectives

Formulate and publish accounting standards (in

public interest) for companies to observe in

presenting financial statements.

Promote world-wide acceptance and observance.

Works generally for improvement and

harmonisation of regulations, accounting standards

and procedures relating to financial statements

presentation.

Board (14)(approves IAS

[IFRS], ED, SIC [IFRIC])

7 Liaison Members

International Financial Reporting

Interpretations Committee (12+1)

(publishes draft Interpretations and

prepares draft of final Interpretations)

Standards Advisory

Council (SAC)

(advises Board)

Trustees (19)(appoint Board, IFRIC and SAC)

(6 North America, 6 Europe, 4 Asia/Pacific, 3 Other)

National standard setters

(Australia/NZ, Canada,

France, Germany, Japan,

UK, USA.)

International Accounting Standard Boards

(IASB) Structure

International Accounting Standard

Commissions (IASC) Foundation

19 trustees :

6 from North America

6 from Europe

4 from Asia Pacific

3 from any area

Appoint IASB members, Standard Advisory Council

(SAC) and International Financial Reporting

Interpretations Committee (IFRIC).

Monitor IASB’s effectiveness, raise funds, approve budget,

responsible for constitution.

Standard Advisory Council (SAC)

About 50 members from throughout the

world.

Meets three times each year.

Provides advice to IASB on priorities.

Informs IASB of implications of proposed

standards.

International Financial Reporting

Interpretations Committee (IFRIC)

12 voting members and a non-voting

chairman.

Provide guidance on reporting issues not

specifically addressed in IASB’s standards,

or where unsatisfactory or conflicting

interpretations have developed.

Financial Accounting Foundation

(FAF)

Financial Accounting Standards Board

(FASB)

Financial Accounting Standards Advisory Council

(FASAC)

Governmental Accounting Standards Board

(GASB)

Governmental Accounting Standards Advisory Council

(GASAC)

Governmental Accounting Standard Boards (GASB)

Landasan Operasional / Landasan

Praktik

Tingkat 3

Praktik, konvensi, dan kebiasaan pelaporan yg

sehat

Buku teks, buku ajar, artikel, dan pendapat ahli.

Tingkat 2

Buletin teknis

Peraturan Pemerintah

untuk industri

Pedoman atau Praktik Akuntansi Industri

Simpulan Riset

Akuntansi

Tingkat 1

Pernyataan Standar Akuntansi Keuangan

(PSAK)

Interpretasi Pernyataan Standar Akuntansi Keuangan (IPSAK)

Landasan Konseptual (Conceptual Framework)

Kerangka dasar (basic framework) penyusunan dan penyajian Laporan Keuangan (Financial Statement)

GAAP Framework

in Indonesia

Indonesian GAAP (PSAK)

Adopted International Financial Reporting Standard

(IFRS) in Indonesian GAAP (PSAK)

Menurut Prof. DR. Insukendro dalam makalah Penerapan Nilai Wajar untuk Penilaian

Aktiva Tetap dan Pengaruhnya terhadap Besaran Ekonomika , sbb :

Munculnya skandal Enron : “cook the books” menyadarkan FASB (Financial

Accounting Standard Board) di USA mengenai perlu pendefinisian ulang dan

pengetrapan nilai wajar dalam laporan keuangan perusahaan. Dalam bulan September

2006, FASB melakukan perubahan yang sangat berarti mengenai ketentuan GAAP

(Generally Accepted Accounting Principles) dan berpengaruh terhadap bisnis di dunia.

Berdasarkan ketentuan tsb semua laporan keuangan yang dikirim ke masyarakat di luar

perusahaan wajib disusun berdasar nilai wajar (King, 2008: 1-2).

Negara-negara di kawasan ASEAN juga telah mengapdosi konsep nilai wajar dalam

sistem akuntansinya (lihat misalnya studi yang dilakukan oleh Lee, 2008; Sui, 2008

dan Monthapan, 2008). Ikatan Akuntan Indonesia(IAI) / Dewan Standar Akuntansi

Indonesia (DSAI) (2007) juga telah mengadopsi konsep nilai wajar dalam PSAK

(Pernyataan Standar Akuntansi Keuangan) di Indonesia.

Adopted International Financial Reporting Standard

(IFRS) in Indonesian GAAP (PSAK)

Pengadopsian nilai wajar dalam sistem akuntansi ternyata berpengaruh

terhadap variabel mikroekonomika dan makroekonomika suatu negara (lihat

misalnya: Cornett,1996; Shortridge dkk, 2006 dan Breitenbach dkk, 2007).

IAS 16 dan FRS 116 mendefinisikan: Fair Value is the amount for which an

asset could be exchanged between knowledgeable, willing parties in an arm’s

length transaction (lihat juga: Lee, 2008 dan Sui, 2008).

SFAS 157 mendefinisikan: Fair Value is the price that would be received to

sell an asset, or paid to transfer a liability, in an orderly transaction between

market participants at the measurement date (lihat juga: King, 2008: 78).

IAI/DSAI dalam PSAK (2007) mendefinisi-kan nilai wajar (fair value) adalah

jumlah yang dipakai untuk mempertukarkan suatu aset antara pihak-pihak

yang berkeinginan dan memiliki pengetahuan memadai dalam suatu transaksi

dengan wajar (arm’s length transaction).

Nampaknya definisi nilai wajar dari IAI serupa dengan IAS 16 dan FRS 116 .

More Benefits of Convergence to International

Financial Reporting Standard (IFRS)

1. Inter-firm comparability = lower cost to

investors.

2. Lower listing costs with multiple listings.

3. Greater competition amongst exchanges.

4. More efficient resource allocation.

5. Lower cost of capital.

6. Higher global economic growth rate.

REFERENCES

1. American Institute of Certified Public Accountants (AICPA), http://www.aicpa.org

2. Financial Accounting Standard Board (FASB), http://www.fasb.org

3. Hague, Ian P.N., Update on International AccountingStandards, Principal, Accounting Standard, AcSB, Canada, Special LibrariesAssociation, Toronto, June 2005.

4. Indonesian Institute of Accountants (IIA), Dewan Standard AkuntansiKeuangan (DSAK), http://www.iaiglobal.or.id

5. Insukendro, Penerapan Nilai Wajar untuk Penilaian Aktiva Tetap danPengaruhnya terhadap Besaran Ekonomika, Program Magister EkonomikaPembangunan Fakultas Ekonomika dan Bisnis UGM Yogyakarta.

6. International Accounting Standard Board (IASB), http://www.iasb.org

7. International Financial Reporting Standard (IFRS), http://www.ifrs.org

8. Kieso, Donald E., Jerry J. Weygandt & Terry D. Warfield, IntermediateAccounting, John Wiley & Sons, Inc, 13th Ed, 2009.

9. Warren, Carl S., James M. Reeve & Philip E. Fess, Accounting, South-Western College Publishing, 21th Ed, 2004.