FASB ASC Assignments (Summer 2020)

The Financial Accounting Standard Board (FASB) maintains the Accounting Standards Codification (ASC), which is the source of generally accepted accounting principles (GAAP). The ASC is formatted in four numbers that are connected by hyphens. For example, the treasury stock is defined as "Repurchased common stock is often referred to as treasury stock or treasury shares" (505-30-05-02) in the FASB ASC database, http://aaahq.org/ascLogin.cfm (Username: AAA52235; Password: M3DH4ey). The first number (505) represents the topic number, i.e., 505 (equity) that includes several subtopics, such as treasury stock (505-30). Then, the treasury stock definition can be found in the second paragraph of the overview and background section (505-30-05).

For this assignment, students need to identify the ASC (i.e., four numbers) that can serve as authoritative guidance for the issue raised in each of the cases below and provide a short response.

1.Lee Oil Lab purchased testing equipment to evaluate the properties of the shale reservoirs for a 5-year note receivable on which payment started immediately. Nonetheless, Lee Oil needs to set up and test the equipment over the next 3 months. Lee Oil would like to know how the interest costs incurred during the installation period would affect the historical cost of the new equipment.

2.Lee Bio Lab acquired software to carry out research and development activities. Lee Bio would like to know how the cost of software should be recorded in their accounting ledger.

3.Robert Parker wanted to refer to the two types of foreign currency transactions in which gains and losses are not included in net income.

4.Mr. Tax wonders how changes in tax laws and rates in the current year should affect the computation of deferred tax liabilities and assets.

5.The bank of Joy Williams is reluctant to increase the line of her credit because of the high current ratio as shown in her current financial statements. Accordingly, she looks for authoritative guidance that helps her to find out financial arraignments to exclude the substantial amount of short-term obligations from current liabilities.