ACG4111 Intermediate Financial Accounting II

ACG4111 Intermediate Financial Accounting II
Version 3
Financial Accounting Standards Codification Research Assignment
Write your name and student number in the space below.
Student (L, F):___________________________________________________
Student/Panther ID:_________________________
This assignment is comprised of researching several of the more current technical topics
in accounting and responding to several specific technical standard questions about the
topics. You may be asked to interpret how the technical standard is applied or what the
objective(s) of the related GAAP rules are attempting to address. Note that the FASC is
now the one and only source of the technical GAAP standards; other sources are no
longer accepted as GAAP.
You can access the Financial Accounting Standards Board (FASB) Financial Accounting
Standards Codification database at: http://aaahq.org/ascLogin.cfm. Type in the following:
Username: AAA52092
Password: 92FqjZZ
Click on “FASB Accounting Standards Codification” and the database will open. The
topics are found on the left side of the welcome page. Clicking on the topic will return the
subtopics and contents. You can access each topic by either scrolling over the topics and
subtopics until you find the related content or topic or by using the search box found in
the top right of the screen.
I. FASB Accounting Standards Codification (FASC) Questions
This section deals with certain general background considerations and information related
to the FASC and the answers can be found by clicking the “About the Codification” and
“Notice to Constituents” sections on the FASC Welcome Page. This section is a good
general source of information about the FASC and should be reviewed prior to starting to
answer the specific questions set forth in all sections. The related research questions
that you must answer are:
(a) When did the FASC Codification become effective?
(b) Did the FASC change prior GAAP?
(c) What does the FASB expect from the new FASC structure and system?
(d) What are the “topics” used in the ASC?
(e) Are Securities and Exchange Commission (SEC) references included in the ASC?
II. Topic-Specific Research
You have been hired at an audit firm as a first year staff. This firm requires that all
references to generally accepted accounting principles in the audit workpapers include
the corresponding FASC citation (topic and subtopics). Below are three independent
situations found at your clients that require research and documentation.
For each question, (1) provide the citation number (topic and subtopic) that
addresses the question and (2) answer the question. Document this under the question,
indenting your answer or otherwise indicating it is the answer (bold, underline, different
color, etc.)
1. Inventories
You have been assigned to an agricultural client. You are not familiar with accounting for
inventory in the agricultural industry. You need to do some research to familiarize
yourself with the issues involved.
(a) Identify the primary authoritative guidance for the accounting for inventories.
(b) Define the meaning of cost as it applies to the initial measurement of inventory.
(c) Indicate the circumstances when it is appropriate to initially measure agricultural
inventory at fair value.
(d) What is a major objective of accounting for inventory?
(e) Are abnormal freight charges included in the cost of inventory?
2. Equity
Hincapie Co., a specialty bike-accessory manufacturer, is expecting growth in sales of
some products targeted to the low-price market. Hincapie is contemplating a preferred
stock issue to help finance this expansion in operations. The company is leaning toward
participating preferred stock because ownership will not be diluted, but the investors will
get an extra dividend if the company does well. The company management wants to be
certain that its reporting of this transaction is transparent to its current shareholders and
asks you to research the disclosure requirements related to its capital structure.
(a) Identify the primary authoritative guidance that addresses disclosure of information
about capital structure.
(b) Find definitions of the following:
(i) Securities.

(c) What information about securities must companies disclose? Discuss how Hincapie
should report the proposed preferred stock issue.
3. Pensions
Monat Company has grown rapidly since its founding in 2004. To instill loyalty in its
employees, Monat is contemplating establishment of a defined benefit plan. Monat
knows that lenders and potential investors will pay close attention to the impact of the
pension plan on the company’s financial statements, particularly any gains or losses that
develop in the plan. Monat has asked you to conduct some research on the accounting for
gains and losses in a defined benefit plan.
(a) Identify the primary authoritative guidance that addresses the accounting for defined
benefit plans.
(b) Briefly describe how pension gains and losses are accounted for.
(c) Explain the rationale behind the accounting method described in part (b).
(d) What is the related pension asset or liability that will show up on the balance sheet?
When will each of these situations occur?