The Logic Behind the Ledger: Framework, Updates, Estimates, and Error Corrections (Course Id 2755)

• Who is this course for?
  This course is designed for CPAs and accountants who need Continuing Professional Education (CPE) and want to deepen their understanding of U.S. financial reporting principles.

• What is this course about or what problem does this course solve?
  The course addresses the foundational concepts and practical application of U.S. GAAP, including the FASB’s Conceptual Framework, ASUs, accounting estimates, changes in principles, and error corrections, helping professionals better understand and apply financial reporting standards.

• How can the knowledge from this course be used?
  CPAs and accountants can apply the course knowledge to accurately develop, evaluate, and correct financial statements in compliance with GAAP, including handling updates, estimates, and restatements.

• Why is this course important to a CPA or Accountant?
  This course is important because it equips professionals with the necessary framework and tools to ensure accurate, transparent, and compliant financial reporting, which is essential for maintaining trust and integrity in financial information.

• When is this course relevant or timely?
  The course is especially relevant now due to evolving accounting standards and the ongoing issuance of new ASUs, which require professionals to stay updated and adapt their reporting practices accordingly.

• How is a course like this consumed or used?
  This self-study course is consumed through reading the provided text and completing a final exam within one year of purchase to earn CPE credit, with no prerequisites or advance preparation required.

This course provides a comprehensive look at the foundation and application of U.S. financial reporting principles. It begins with the FASB’s Conceptual Framework, covering the objective of financial reporting, the reporting entity, qualitative characteristics of useful information, and the recognition, measurement, and presentation of financial statement elements. Building on that foundation, the course explores how Accounting Standards Updates (ASUs) are issued, evaluated, and disclosed, the role and risks of accounting estimates, the treatment of accounting principle changes, and the proper handling of error corrections, including restatements. Together, these topics equip CPAs with a deeper understanding of how financial information is developed, maintained, and corrected within the structure of GAAP. 

NASBA QAS - Text - NASBA Registry - 2755

Chapter 1
Objective of Financial Reporting and the Reporting Entity

• Identify the primary objective of general purpose financial reporting
• Recognize the types of information financial statements are intended to convey
• Distinguish the limitations inherent in financial reporting
• Determine the criteria used to define a reporting entity

Chapter 2
Qualitative Characteristics of Useful Financial Information

• Identify the fundamental qualitative characteristics of financial information
• Recognize the enhancing qualitative characteristics and their impact on financial reporting
• Differentiate between relevance and faithful representation
• Determine the effect of materiality on financial information relevance
• Recall the role of the cost constraint in financial reporting decisions

Chapter 3
Elements of Financial Statements

• Identify the elements of financial statements and their interrelationships
• Determine the criteria for recognizing financial statement elements
• Identify characteristics of various financial statement accounts
• Differentiate between revenues and gains as well as expenses and losses

Chapter 4
Recognition, Measurement, and Presentation

• Identify common measurement bases used in financial reporting
• Determine factors that influence the selection of measurement bases
• Recognize principles of presentation, including classification and aggregation
• Select disclosure principles that enhance financial statement transparency

Chapter 5
Understanding Accounting Standards Updates (ASUs)

• Identify standard elements included within each FASB ASU
• Distinguish between different transition requirements
• Recognize SEC disclosure requirements relating to pending ASUs
• Identify best practices for effectively tracking ASUs

Chapter 6
Use of Accounting Estimates

• Identify key areas in U.S. GAAP where accounting estimates are required
• Recognize the potential risks and challenges associated with accounting estimates
• Differentiate between the proper use of estimates and instances of misuse or manipulation
• Determine the impact of inaccurate accounting estimates on financial statements

Chapter 7
Accounting Principle Changes

• List the different types of accounting changes and how they affect an entity’s financial statements
• Differentiate between the requirements for the different types of accounting changes
• Identify disclosure requirements related to changes in accounting principles

Chapter 8
Accounting Error Corrections

• Identify the steps involved in the required assessment for a correction of an error
• Differentiate between the iron curtain and rollover methods for quantifying a correction of an error
• Recognize the different types of restatements required as a result of accounting changes

Chapter 1 - Objective of Financial Reporting and the Reporting Entity

Learning Objectives

Chapter Overview

Introduction

Objective of General Purpose Financial Reporting

Information Provided by Financial Reports

The Reporting Entity

Conclusion

Review Questions

Chapter 2 - Qualitative Characteristics of Useful Financial Information

Learning Objectives

Chapter Overview

Introduction

Qualitative Characteristics of Useful Financial Information

Fundamental Characteristic – Relevance

Fundamental Characteristic – Faithful Representation

Applying the Fundamental Characteristics

Enhancing Characteristic – Comparability

Enhancing Characteristic – Verifiability

Enhancing Characteristic – Timeliness

Enhancing Characteristic – Understandability

Applying the Enhancing Characteristics

Cost Constraint of Useful Financial Reporting

Conclusion

Review Questions

Chapter 3 - Elements of Financial Statements

Learning Objectives

Chapter Overview

Introduction

Assets

Liabilities

Equity/Net Assets

Revenues

Expenses

Gains

Losses

Distinguishing Between Revenues, Expenses, Gains, and Losses

Conclusion

Review Questions

Chapter 4 – Recognition, Measurement, and Presentation

Learning Objectives

Chapter Overview

Introduction

Recognition

Derecognition

Measurement

Presentation

Notes to the Financial Statements

Conclusion

Review Questions

Chapter 5 – Understanding Accounting Standards Updates (ASUs)

Learning Objectives

Chapter Overview

Introduction

What is an ASU and What’s Included?

Where Do I Find the ASUs?

What is Included in Each ASU?

Basis for Conclusions

Other Helpful Resources (i.e., Firm Interpretations)

Preparing for and Implementing Amendments from ASUs

Step 1 – Stay Informed

Step 2 – Determine Applicability/Materiality

Step 3 – Evaluate Options

Step 4 – Assess Disclosures and Benchmark

Step 5 – Track, Update, and Adopt

Conclusion

Review Questions

Chapter 6 – Use of Accounting Estimates

Learning Objectives

Chapter Overview

Introduction

Risks & Challenges in Using Estimates

Examples of Key Estimates

Fair Value Measurements

Impairment of Goodwill and Other Intangible Assets

Contingent Liabilities

Revenue Recognition

Pension and Other Post-Retirement Benefits

Income Taxes

Allowance for Doubtful Accounts

Stock-Based Compensation

Asset Retirement Obligations

Conclusion

Review Questions

Chapter 7 – Accounting Principle Changes

Learning Objectives

Chapter Overview

Introduction

Changes in Accounting Principle

Accounting for the Change in Accounting Principle

Justifying a Change in Accounting Principle

Change in Accounting Principle – Illustrative Example

Disclosures Required for Changes in Accounting Principles

Change in Accounting Estimate

Change in Reporting Entity

Accounting Standards Updates

Conclusion

Review Questions

Chapter 8 – Accounting Error Corrections

Learning Objectives

Chapter Overview

Introduction

Approach to Correcting Errors

Determining if an Error Exists

Materiality

Reporting the Error

Internal Control Considerations

Conclusion

Review Questions

Glossary of Key Terms