Free Custom «Accounting Standards Codification» Essay Paper

1. Describe accounting policiesAccounting policies refers to the financial principles that an organization uses to account its entire earnings and losses. These policies are not the same, they differ from one firm to another but the general goal is that they all deal with the expenses, payroll statements, inventory pricing of products and services, firm investments and other important business categories that an organization has incurred over a certain period of time.These policies are flexible in that they give room for the accountants to bring up questions and issues for those accounting the numbers and will need the accountants to closely monitor the results. Accounting policies are formulated and designed by an accountant but they are implemented by the management. For instance, a situation where a company policies are in action and they require the inventory pricing to be documented and reported for each departments budget in the organization. Another good example is the situation where a company requires installation of expenses such as research and development, projections of organizations policies like banking firm where accounting policies and rules needs an estimation of how to lend loans to customers and its financial implication to the firm.Accounting policies are used in most cases at a time when reports are written. Whether this report is monthly, quarterly or annually a flourishing set of accounting policies will show a clear picture of financial standing of a company while on the other hand; unsuccessful set of accounting policies and rules will result in negative perception of the performance of the company and its financial standing.

 

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Majority of company reports contains the summary of accounting policies of the firm. This is a compliment to the original numbers because this financial statement states policies clearly and shows how each policy was enacted. In general, this normally includes the traditional behavior and practices and reasons to why this was necessary. The concern about corruption in such a situation is inevitable in that parties that responsible in writing the policies are the same people responsible for using them. The role principle of accounting policies is to promote honesty through trust and good will but in many cases this bonds are not respected thus broken. Because of threat of fraud, many accountants in various companies keep a hawk eye on organizations numbers and they do internal audit to ensure that reports are clear and accurate.2. How authoritative literature describes comprehensive income.Comprehensive income refers to as the shift in equity which means net assets of any business corporation during the period coming from transactions carried out and other activities that and circumstances that comes from no owner sources like customers. This is a method of ensuring that income within a business follows the GAAP theory. To achieve maximum income, the companies will have to use structure that does not change the codification of the company. Codification should be flexible, user friendly on online research and easily accessible. This literature will influence the firms to reduce the time and attempts needed to solve issues relating to accounting research.The FASB should be assisted with research and meeting efforts needed during the standard setting process to ensure flexibility of the process. It will aid in provision of accurate information with actual and real time updates when new measures are released and finally, mitigating the risks of those who do not comply with measures through improved stability of the authoritative literature. The codification is launched in order to organize and make the GAAP literature simple so that authoritative literature relates to a specific and particular topic to be located in one place. As a result, this codification makes it much easier for prepares to carry out research on accounting issues. The codification should contain SEC content in order to increase authoritative content issued by SEC and some staff interpretations and administrative guidance have to be incorporated for reference in the codification. For example, SEC staff comments on company performance and accounting series release.

3. Classifications within net income.Net incomes are categories of FASB. Net income is the common form of financial statement that consists of various categories including; continuing operations, discontinued operations and extraordinary items. The continued operations will show what kind of transactions is inevitable in the firm. The discontinued operations are the expenses that the firm will want to withdraw from in order to avoid overspending and increase incomes. They are the recurring items in a business. Extraordinary items can be either unusual or infrequent in nature.When items in the organization are deemed as being frequent or unusual, they classified as continuing operations. For instance, a $2,000 gain on securities that may be reported in a company as part of its net income in 2009 and it had reported adjustment to equity in 2008, would need an adjustment to meet the unrealized gains and losses on securities reported as part of comprehensive income. The income for continuing operations will include a line of discount one early retirement of an employee.4. Classifications within other comprehensive income.Comprehensive income refers to the total non owner shift in equity for certain reporting period of a company. These changes entail all changes in equity rather than transactions from the owners. Most of these changes are seen in the income statement but as important items in the equity section of the balance sheet of shareholder. Comprehensive income will include gains and losses on foreign money transactions that meant for economic hedges of an investment by a foreigner.There are also, unrealized losses and gains that are as result of debt security that is being transferred from held maturity to make it available for sale section. And lastly, comprehensive income is classified as that of unrealized holdings of gains and losses on available for sale securities.