FASB is an independent nonprofit making organization in the United States of America that has the responsibility of establishing standards of accounting and financial reporting for other companies as well as nonprofit organizations. It assumed the work of Accounting Principles Board in 1973, and its purpose is to monitor whether companies and nonprofit organizations meet the set standards when preparing and presenting their financial statements. Below are some of the FASB ASC research cases that have been addressed as per its database information to support the responses given.
FASB ASC-Comprehensive income.
In SFAS no.130, there is a provision of guidelines that can be followed when reporting comprehensive income under FASB. The primary purpose of reporting comprehensive income is to give details on the measure of all changes in equity of any entity that may result from transactions that are recognized and not private as well as other economic events. The FASB always requires that financial statements report comprehensive income. Besides, I defend comprehensive income based on maintenance update 2020, which shows that an entity reporting comprehensive income in a single continuous financial statement shall present its components in sections that are net income and other comprehensive income, and this is supported in these paragraphs(220-10-15-3).
FASB ASC 6-3 Net Income
The definition of net income: it refers to a company’s profit or total earnings. Generally, a given company’s net income is arrived at by taking revenues and subtracting the cost of doing transactions involving depreciation, taxes, interest, and even other expenses. Net income should reflect various items of profit and loss recognized during the period with the only exception of error corrections as addressed in topic 250 of FASB-ASC. However, the requirement that net income be presented as one amount does not apply to the following entities that have developed financial statements with varied formats from those of regular commercial entities, that is, the insurance and investment companies’ entities. (https://asc.fasb.org/link&sourceid=SL7669631-108580&objid=121641772)
FASB ASC 6-3 APB Opinion No. 9
This part specifies the method that can be used when treating error corrections in comparative statements for more than two periods. This part also specifies the disclosures needed when statements based on income issued previously are restated. Moreover, there are also recommendations of methods of presentation of historical and statistical-based financial summaries that are also affected by some error corrections in this section. Perhaps, Generally Accepted Accounting Principles (GAAP) gives guidelines in this part, and therefore income statement presents all its results in GAAP conformity as presented in FASB-ASC topic 225.
FASB ASC 6-4 Discontinued Operations
Discontinued operations generally refer to basic parts of an organization’s primary or core business-line that have been shut down or reported to have been separated either temporarily or permanently from continuing operations on the financial statement. However, as per the FASB ASC report, the discontinued operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. Well, disposal of a component of an entity or a group of components of an entity shall be reported in discontinued operations if the disposal represents a strategic shift that has a major effect on an entity’s operations and financial results under the circumstances such as disposing of entity or group of entities by sale. (Paragraph, 205- 45-1A).Furthermore, a business or nonprofit operation shall be classified as held for sale as a discontinued operation at the acquisition date if the other criteria in paragraph( 205-20-45-1E) are probable of being met within a short period following the acquisition specifically three months.
FASB ASC 6-5 Accounting Changes.
As per the report form FASB ASC, the subtopic of accounting changes provides guidance on the accounting for and reporting of accounting changes and error corrections. An accounting change can be a change in an accounting principle, an accounting estimate, or the reporting entity. Guidance for each of these types of changes is presented in separate headings within each Section. Guidance for error corrections is also presented under a separate heading within each Section. (250-05-1).Perhaps, the discussion also provides guidance for determining whether the retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. When basing our discussions on income statements, some of the past summaries of information based on basic financial statements that include an accounting period in which accounting change reflected forms part of essential consideration in this discussion (250-15-3).Accounting changes are grouped as follows; changes in accounting estimate, change in accounting principle, and also change in reporting entity, which results in varied error or impact in financial statements.
FASB ASC 6-6 Earning per Share
The topic of earning per share is contained FASB ASC (260-05-1), and it specifies the part of the computation, presentation, and also the disclosure requirements for earnings per share for entities owning common stock publicly. Besides, earnings per share refer to the amount of earnings attributable to each share of common stock. However, for convenience, the term is used to refer to either earnings or loss per share. The main objective of basic earnings per share is to measure the performance of an entity over the reporting period while that of diluted earnings per share is, to measure the performance of an entity over the reporting period while giving effect to all dilutive potential common shares that were outstanding during the given period (260-10). The glossary of terms associated with earnings per share includes terms such as;
- Basic Earnings per Share
- Stock Dividend
- Diluted Earnings per Share
- Security
- Contingently Issuable Shares
- Common Stock
- Reverse Treasury
- Call Option and Conversion Rate
- Stock Method
- Subsidiary