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Part 1 -Find a proposed standard from XXXXXXXXXXthat is related to this course (asset-type transactions only) in the FASB Codification system. Prepare a 2-3 page summary of the FASB proposal...

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  • Part 1-Find a proposed standard from XXXXXXXXXXthat is related to this course (asset-type transactions only) in the FASB Codification system. Prepare a 2-3 page summary of the FASB proposal highlighting what changed, why, and the potential impact on the financial statements and disclosures
  • Part 2-Find a company's financial statements, using the EDGAR database. Use Excel to create an applicable supporting schedule and financial statement(s) that would provide an example of the application of the proposed standard you selected for the company you selected. Ex. if the standard you found included a different method to calculate inventory you would create a worksheet using that proposed inventory method and then show how that change would affected the financial statements of the company you selected from EDGAR.
  • Part 3-Prepare a 2-3 page analysis discussing if you think this FASB proposal is a good idea now that you have seen the impact on the financial statements or if you think there is a potential for misleading financial statements as a result of this proposal.
  • The report should be should be 4-5 pages in total (not including cover page, abstract, or references) for the entire project, which is split into several weeks.
  • Include the Excel spreadsheet(s) as exhibits in your paper
  • Include a minimum of 2 scholarly sources from the KU Library, EDGAR resource and FASB proposed standard.
    • All sources used are to be cited in APA format
    • Please use the writing center if needed
Answered 7 days After May 14, 2021

Solution

Pallavi answered on May 20 2021
162 Votes
Practical application of proposed FASB accounting standard: Financial instruments- Credit Losses
Contents
Part 1    3
Proposed FASB standard    3
Reasons behind these changes    3
Changes introduced by the said accounting standard    3
Impact on financial statements    3
Disclosures required under this standard    3
Part 2    4
Practical Application of proposed standard    4
Company selected for this report    4
Application of proposed standard to Agilent Technologies    4
Part 3    5
Analysis on Feasibility of the proposed standard and impact on financial statements    5
Existing accounting treatment    5
Changes
ought by the proposed Standard    5
Impact on financial statements    6
Conclusion    6
References    7
Part 1
Proposed FASB standard
The proposed FASB standard that has been selected for the purpose of this report is financial instruments- Credit Losses which provides guidance on measurement of credit losses related to financial instruments.
Reasons behind these changes
Under the present U.S. GAAP, the losses related to financial instruments are recognized as per incu
ed loss method, which provides that an expected loss related to financial instruments will be recognized only when it has been incu
ed. This means that credit losses related to financial statements cannot be recorded unless there exists a strong probability that such losses will actually be incu
ed (FASB 2016a). This was creating issues in appropriate reporting of financial information because the entities were unable to recognize those credit losses related to financial statements that were expected to be incu
ed but did not meet the “probability” criteria at that point of time.
Changes introduced by the said accounting standard
The aforesaid issue was addressed by FASB and IASB by forming an advisory committee for suggesting improvements related to financial reporting. It was identified by the advisory committee that this weakness exists in the cu
ent GAAP which leads to delay in recognition of credit losses.
The main changes required by this accounting standard is that financial assets should be recorded at amortized cost and should be shown in the financial statements at the net amount which is expected to be collected from them (FASB 2016a). The credit losses will have to be recorded in the income statement and any further increase or decrease in the credit losses will have to be recorded through the income statement.
Impact on financial statements
The amendment
ought by this standard would have an impact on those entities who hold financial assets and/or hold net investment in lease which have not been recognized at fair value through net income approach. The changes
ought this standard also cover loans, trade receivables, and debt securities. The amendments provided by this standard will be applicable for financial years that commence after 15.12.2020 (FASB 2016a).
Disclosures required under this standard
The standard provides for increased disclosures so as to assist the investor and other users of financial statements to understand the major estimates and judgments used for estimation of...
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