Research of Emerging Accounting Issues Essay

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.....mission of the Emerging Issues Task Force (EITF) exerts upon the Financial Accounting Standards Board (FASB)



The Emerging Issues Task Force (EITF) was established with the main purpose of addressing and coming up with resolve for current issues being faced by professionals in the accounting field, which were not addressed by announcements of the Financial Accounting Standards Board (FASB). Prior to the establishment of ETIF in 1984, the FASB constantly faced challenges of not being able to offer well-timed and sensible solutions to developing practice problems. The EITF was therefore designed to disseminate and propagate carrying out guidance within the structure of the Accounting Standards Codification to decrease multiplicity when it comes down to it on a well-timed basis. In their field of profession, accountants experience a wide range of issues that are not comprehensively addressed in accounting pronouncements, and, which necessitate prompt resolve. In addition, such professionals insist that incessantly increasing body of professional statements has generated an issue of an overwork of standards. The most significant impact that the mission of the EITF applies on the FASB is to reduce the necessity for the FASB to devote time and determination addressing constricted execution, solicitation, or other developing issues that can be investigated within prevailing Generally Accepted Accounting Principles (GAAP) (FASB, n.d).



Analyze the EITF's effectiveness with finding resolutions to emerging accounting issues, and make at least two (2) recommendations as to how they could improve their effectiveness. Justify your recommendations



The EITF has to come to unanimity on a prospective solution to an issue through a voting system whereby 13 members out of the total 15 task force members have to come to an agreement prior to the publication of the solution. The Emerging Issues Task Force is quite efficacious in having swift and prompt responses to accounting issues and resolving them in comparison to the FASB. Moreover, the task force's effectiveness can be perceived in the sense that the members respond to issues in a way that is less commanding and imposing. Nonetheless, there are areas that necessitate improvement by the EITF (Herz, 2015). One of these key areas is taking less number of meetings to come up with resolutions for emerging accounting issues that arise. In particular, it should not take the EITF an excess of three meetings to address and resolves such issues.

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Another area of improvement is the voting process. The prevailing process being used is interesting and distinctive to some extent. As pointed above, reaching an ultimate consensus necessitates that no more than three members of the task force object. Despite the fact that his method was purposed to promote reaching of a consensus, offer prompt direction and to diminish diversity in practice, it can also generate some odd outcomes. This approach brings about the least objectionable accounting instead of better accounting. A recommendation would be to necessitate a majority positive voting result (Herz, 2015).



Research the issue you selected from the EITF's "Description and Status of Current Issues" page, and analyze at least two (2) key areas being addressed by the EITF



There are different issues addressed by the EITF. One of the key issues is EITF Issue Number 15-F Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. One issue discussed is the distributions received from equity method investments. The main direction offered by the task force provides an accounting policy selection for the classification of distributions received from equity method investments. These amounts can be classified using two different approaches, which include the nature of distribution approach and the cumulative earnings approach (FASB, 2016).



With respect to the cumulative earnings method, from the outset, a comparison of the distributions received would be made by the investor in relation to the cumulative equity approach earnings. The distributions received up until they satisfy the cumulative equity earnings amount, would be deemed a profit or yield on investment and therefore categorized in operating activities. Any surplus distributions received would be deemed a profit of investment and categorized in investing activities. On the other hand, there is the classification of distributions on the basis of the nature of activities undertaken by the investee that give rise to the distribution. If the vital data and information is inaccessible in order to ascertain the nature of activities, then the cumulative earnings method ought to be employed. However, this change has to be indicated and reported on the financial books (Althoff and McKeever, 2016).



A second issue is contingent consideration payments that are made subsequent to a business combination. Guidance given is that cash….....

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References

Althoff, J., McKeever, J. (2016). FASB finalizes guidance to simplify elements of cash flow classification. PricewaterhouseCoopers. Retrieved from: http://www.pwc.com/us/en/cfodirect/assets/pdf/in-brief/us-2016-35-fasb-cash-flow-classification.pdf

Althoff, J., McKeever, J., Or, D. (2016). EITF observer A meeting synopsis. PricewaterhouseCoopers. Retrieved from: https://www.pwc.com/us/en/cfodirect/assets/pdf/eitf-observer/eitf-observer-june-2016.pdf

Deloitte. (2017). Statement of cash flows: Key differences between U.S. GAAP and IFRSs. Retrieved from: https://www.iasplus.com/en-us/standards/ifrs-usgaap/cashflows

Epstein, B. J., Nach, R., & Bragg, S. M. (2009). Wiley GAAP 2010: interpretation and application of generally accepted accounting principles. John Wiley & Sons.

FASB. (2016). EITF Issue No. 15-F: Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. Retrieved from: http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176164069142

FASB. (n.d). EMERGING ISSUES TASK FORCE (EITF). Retrieved from: http://www.fasb.org/eitf/about_eitf.shtml

Herz, R. (2015). Improving EITF to Improve Accounting Practice. Compliance Week. Retrieved from: https://www.complianceweek.com/blogs/robert-herz/improving-eitf-to-improve-accounting-practice#.WP_JFWmGPIV

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