CA1-1 (FASB and Standard-Setting) SOLUTION

CA1-1
(FASB and Standard-Setting) Presented below are four statements which you are to identify as
true or false. If false, explain why the statement is false.
1. GAAP is the term used to indicate the whole body of FASB authoritative literature.
2. Any company claiming compliance with GAAP must comply with most standards and interpretations
but does not have to follow the disclosure requirements.
3. The primary governmental body that has influence over the FASB is the SEC.
4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard.

Solution
1. True.
2. False. Any company claiming compliance with GAAP must comply with all standards and interpretations, including disclosure requirements.
3. True.
4. False. In establishing financial accounting standards, the FASB relies on two basic premises;
a) the FASB should be responsive to the needs and viewpoints of the entire economic community, not just the public accounting profession, and b) it should operate in full view of the public through a "due process" system that gives interested people ample opportunities to make their view known.

To be continued....