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Definition of FASB

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FASB

Financial Accounting Standards Board. Sets accounting standards for U.S. firms.



Related Terms:

FASB No. 52

The U.S. accounting standard which was replaced by fasb No. 8. U.S. companies are required
to translate foreign accounts by the current rate and report the changes from currency fluctuations in a
cumulative translation adjustment account in the equity section of the balance sheet.


FASB No. 8

U.S. accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by
the temporal method. Gains and losses from currency fluctuations were reported in current income. It was in
effect between 1975 and 1981 and became the most controversial accounting standard in the U.S. It was
replaced by fasb No. 52 in 1981.


Cumulative Translation Adjustment (CTA) account

An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the fasb No. 52 rule.


Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by fasb No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.


Generally Accepted Accounting Principles (GAAP)

A common set of standards and procedures
for the preparation of general-purpose financial statements that either have been established
by an authoritative accounting rule-making body, such as the Financial Accounting
Standards Board (fasb), or over time have become accepted practice because of their universal
application.



Settlement rate

The rate suggested in Financial Accounting Standard Board (fasb) 87 for discounting the
obligations of a pension plan. The rate at which the pension benefits could be effectively settled off the
pension plan wished to terminate its pension obligation.


Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.


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Accelerated depreciation

Any depreciation method that produces larger deductions for depreciation in the
early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule
allowed for tax purposes, is one such example.


accelerated depreciation

(1) The estimated useful life of the fixed asset being depreciated is
shorter than a realistic forecast of its probable actual service life;
(2) more of the total cost of the fixed asset is allocated to the first
half of its useful life than to the second half (i.e., there is a
front-end loading of depreciation expense).


Accelerated depreciation

Any of several methods that recognize an increased amount
of depreciation in the earliest years of asset usage. This results in increased tax benefits
in the first few years of asset usage.


Account

An explanation or report in Financial terms about the transactions of an organization.


Account Value

The sum of all the interest options in your policy, including interest.


Accountability

The process of satisfying stakeholders in the organization that managers have acted in the best interests of the stakeholders, a result of the stewardship function of managers, which takes place through accounting.


Accounting

A collection of systems and processes used to record, report and interpret business transactions.


accounting

A broad, all-inclusive term that refers to the methods and procedures
of Financial record keeping by a business (or any entity); it also
refers to the main functions and purposes of record keeping, which are
to assist in the operations of the entity, to provide necessary information
to managers for making decisions and exercising control, to measure
profit, to comply with income and other tax laws, and to prepare Financial
reports.


Accounting and Auditing Enforcement Release (AAER)

Administrative proceedings or litigation releases that entail an accounting or auditing-related violation of the securities laws.


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Accounting change

An alteration in the accounting methodology or estimates used in
the reporting of Financial statements, usually requiring discussion in a footnote
attached to the Financial statements.


Accounting earnings

Earnings of a firm as reported on its income statement.



Accounting entity

A business for which a separate set of accounting records is being
maintained.


Accounting equation

The representation of the double-entry system of accounting such that asSets are equal to liabilities plus capital.


Accounting equation

The formula AsSets = Liabilities + equity.


accounting equation

An equation that reflects the two-sided nature of a
business entity, asSets on the one side and the sources of asSets on the
other side (asSets = liabilities + owners’ equity). The asSets of a business
entity are subject to two types of claims that arise from its two basic
sources of capital—liabilities and owners’ equity. The accounting equation
is the foundation for double-entry bookkeeping, which uses a
scheme for recording changes in these basic types of accounts as either
debits or credits such that the total of accounts with debit balances
equals the total of accounts with credit balances. The accounting equation
also serves as the framework for the statement of Financial condition,
or balance sheet, which is one of the three fundamental Financial
statements reported by a business.


Accounting Errors

Unintentional mistakes in Financial statements. accounted for by restating
the prior-year Financial statements that are in error.


Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.


Accounting insolvency

Total liabilities exceed total asSets. A firm with a negative net worth is insolvent on
the books.


Accounting Irregularities

Intentional misstatements or omissions of amounts or disclosures in
Financial statements done to deceive Financial statement users. The term is used interchangeably with fraudulent Financial reporting.


Accounting liquidity

The ease and quickness with which asSets can be converted to cash.


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Accounting period

The period of time for which Financial statements are produced – see also Financial year.



Accounting Policies

The principles, bases, conventions, rules and procedures adopted by management in preparing and presenting Financial statements.


Accounting rate of return (ARR)

A method of investment appraisal that measures
the profit generated as a percentage of the
investment – see return on investment.


accounting rate of return (ARR)

the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow


Accounting system

A set of accounts that summarize the transactions of a business that have been recorded on source documents.


Accounts

‘Buckets’ within the ledger, part of the accounting system. Each account contains similar transactions (line items) that are used for the production of Financial statements. Or commonly used as an abbreviation for Financial statements.


Accounts payable

Money owed to suppliers.


ACCOUNTS PAYABLE

Amounts a company owes to creditors.


Accounts payable

Amounts owed by the company for goods and services that have been received, but have not yet been paid for. Usually accounts payable involves the receipt of an invoice from the company providing the services or goods.


accounts payable

Short-term, non-interest-bearing liabilities of a business
that arise in the course of its activities and operations from purchases on
credit. A business buys many things on credit, whereby the purchase
cost of goods and services are not paid for immediately. This liability
account records the amounts owed for credit purchases that will be paid
in the short run, which generally means about one month.


Accounts payable

Acurrent liability on the balance sheet, representing short-term obligations
to pay suppliers.


Accounts Payable

Amounts due to vendors for purchases on open account, that is, not evidenced
by a signed note.


Accounts Payable Days (A/P Days)

The number of days it would take to pay the ending balance
in accounts payable at the average rate of cost of goods sold per day. Calculated by dividing
accounts payable by cost of goods sold per day, which is cost of goods sold divided by 365.


Accounts receivable

Money owed by customers.


ACCOUNTS RECEIVABLE

Amounts owed to a company by customers that it sold to on credit. Total accounts receivable are usually reduced by an allowance for doubtful accounts.


Accounts receivable

Amounts owed to the company, generally for sales that it has made.


accounts receivable

Short-term, non-interest-bearing debts owed to a
business by its customers who bought goods and services from the business
on credit. Generally, these debts should be collected within a month
or so. In a balance sheet, this asset is listed immediately after cash.
(Actually the amount of short-term marketable investments, if the business
has any, is listed after cash and before accounts receivable.)
accounts receivable are viewed as a near-cash type of asset that will be
turned into cash in the short run. A business may not collect all of its
accounts receivable. See also bad debts.


Accounts receivable

A current asset on the balance sheet, representing short-term
amounts due from customers who have purchased on account.


Accounts Receivable

Amounts due from customers for sales on open account, not evidenced
by a signed note.


Accounts Receivable

Money owed to a business for merchandise or services sold on open account.


Accounts Receivable Days (A/R Days)

The number of days it would take to collect the ending
balance in accounts receivable at the year's average rate of revenue per day. Calculated as
accounts receivable divided by revenue per day (revenue divided by 365).


Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.


accounts receivable turnover ratio

A ratio computed by dividing annual
sales revenue by the year-end balance of accounts receivable. Technically
speaking, to calculate this ratio the amount of annual credit sales should
be divided by the average accounts receivable balance, but this information
is not readily available from external Financial statements. For
reporting internally to managers, this ratio should be refined and finetuned
to be as accurate as possible.


Accrual accounting

The recording of revenue when earned and expenses when
incurred, irrespective of the dates on which the associated cash flows occur.


accrual-basis accounting

Well, frankly, accrual is not a good descriptive
term. Perhaps the best way to begin is to mention that accrual-basis
accounting is much more than cash-basis accounting. Recording only the
cash receipts and cash disbursement of a business would be grossly
inadequate. A business has many asSets other than cash, as well as
many liabilities, that must be recorded. Measuring profit for a period as
the difference between cash inflows from sales and cash outflows for
expenses would be wrong, and in fact is not allowed for most businesses
by the income tax law. For management, income tax, and Financial
reporting purposes, a business needs a comprehensive record-keeping
system—one that recognizes, records, and reports all the asSets and liabilities
of a business. This all-inclusive scope of Financial record keeping
is referred to as accrual-basis accounting. Accrual-basis accounting
records sales revenue when sales are made (though cash is received
before or after the sales) and records expenses when costs are incurred
(though cash is paid before or after expenses are recorded). Established
Financial reporting standards require that profit for a period
must be recorded using accrual-basis accounting methods. Also, these
authoritative standards require that in reporting its Financial condition a
business must use accrual-basis accounting.


Accruals accounting

A method of accounting in which profit is calculated as the difference between income when it is earned and expenses when they are incurred.


Accrued Income

income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.


Accumulated Other Comprehensive Income

cumulative Gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency Financial
statements, certain Gains and losses on Financial derivatives, and from adjustments for underfunded
pension plans.


Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's asSets.


Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a
better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy


Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.


Adjusted Income from Continuing

Operations reported income from continuing operations
adjusted to remove nonrecurring items.


After-tax real rate of return

Money after-tax rate of return minus the inflation rate.


Aggressive Accounting

A forceful and intentional choice and application of accounting principles
done in an effort to achieve desired results, typically higher current earnings, whether the practices followed are in accordance with generally accepted accounting principles or not. Aggressive
accounting practices are not alleged to be fraudulent until an administrative, civil, or criminal proceeding takes that step and alleges, in particular, that an intentional, material misstatement
has taken place in an effort to deceive Financial statement readers.


algebraic method

a process of service department cost allocation
that considers all interrelationships of the departments
and reflects these relationships in simultaneous
equations


All equity rate

The discount rate that reflects only the business risks of a project and abstracts from the
effects of financing.


Allowance for doubtful accounts

A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.


Allowance for Doubtful Accounts

An estimate of the uncollectible portion of accounts receivable
that is subtracted from the gross amount of accounts receivable to arrive at the estimated collectible
amount.


Allowance method

A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.


Amortizing interest rate swap

Swap in which the principal or national amount rises (falls) as interest rates
rise (decline).


Annual percentage rate (APR)

The periodic rate times the number of periods in a year. For example, a 5%
quarterly return has an APR of 20%.


annual percentage rate (APR)

Interest rate that is annualized using simple interest.


Annual report

Yearly record of a publicly held company's Financial condition. It includes a description of the
firm's operations, its balance sheet and income statement. SEC rules require that it be distributed to all
shareholders. A more detailed version is called a 10-K.


Annual Report

The report required by the Stock Exchange for all listed companies, containing the company’s Financial statements.


Annual report

A report issued to a company’s shareholders, creditors, and regulatory
organizations at the end of its fiscal year. It typically contains at least an income
statement, balance sheet, statement of cash flows, and accompanying footnotes. It
may also contain management comments, an audit report, and other supporting
schedules that may be required by regulatory organizations.


Antidilutive effect

Result of a transaction that increases earnings per common share (e.g. by decreasing the
number of shares outstanding).


Arithmetic average (mean) rate of return

Arithmetic mean return.


Asian currency units (ACUs)

Dollar deposits held in Singapore or other Asian centers.


Asset/equity ratio

The ratio of total asSets to stockholder equity.


Assets

A firm's productive resources.


ASSETS

Anything of value that a company owns.


Assets

Things that the business owns.


Assets

Items owned by the company or expenses that have been paid for but have not been used up.


Assets requirements

A common element of a Financial plan that describes projected capital spending and the
proposed uses of net working capital.


Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.


Auditor's report

A section of an annual report containing the auditor's opinion about the veracity of the
Financial statements.


Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.


Average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices.


Average-Cost Inventory Method

The inventory cost-flow assumption that assigns the average
cost of beginning inventory and inventory purchases during a period to cost of goods sold and
ending inventory.


Average rate of return (ARR)

The ratio of the average cash inflow to the amount invested.


Average tax rate

Taxes as a fraction of income; total taxes divided by total taxable income.


average tax rate

Total taxes owed divided by total income.


Balance of Merchandise Trade

The difference between exports and imports of goods.


Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.


Balance of Payments

The difference between the demand for and supply of a country's currency on the foreign exchange market.


Balance of Payments Accounts

A statement of a country's transactions with other countries.


Balance of trade

Net flow of goods (exports minus imports) between countries.


Balance of Trade

See balance of merchandise trade.


Balance sheet

Also called the statement of Financial condition, it is a summary of the asSets, liabilities, and
owners' equity.


BALANCE SHEET

A “snapshot” statement that freezes a company on a particular day, like the last day of the year, and shows the balances in its asset, liability, and stockholders’ equity accounts. It’s governed by the formula:
AsSets = Liabilities + Stockholders’ equity.


Balance Sheet

A Financial statement showing the Financial position of a business – its asSets, liabilities and
capital – at the end of an accounting period.


Balance Sheet

One of the basic Financial statements; it lists the asSets, liabilities, and equity accounts of the company. The balance sheet is prepared using the balances at the end of a specific day.


balance sheet

A term often used instead of the more formal and correct
term—statement of Financial condition. This Financial statement summarizes
the asSets, liabilities, and owners’ equity sources of a business at a
given moment in time. It is prepared at the end of each profit period and
whenever else it is needed. It is one of the three primary Financial statements
of a business, the other two being the income statement and the
statement of cash flows. The values reported in the balance sheet are the
amounts used to determine book value per share of capital stock. Also,
the book value of an asset is the amount reported in a business’s most
recent balance sheet.


Balance sheet

A report that summarizes all asSets, liabilities, and equity for a company
for a given point in time.


balance sheet

Financial statement that shows the value of the
firm’s asSets and liabilities at a particular time.


Balance Sheet

A Financial report showing the status of a company's asSets, liabilities, and owners' equity on a given date.


Balance sheet exposure

See:accounting exposure.


Balance sheet identity

Total AsSets = Total Liabilities + Total Stockholders' equity


Balanced-Budget Multiplier

The multiplier associated with a change in government spending financed by an equal change in taxes.



 

 

 

 

 

 

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