Transactions and Accounting Standards Codification(ASC)

Following on the understanding of Foreign Currency Transactions, you will research the FASB Accounting Standards Codification (ASC) for authoritative guidance regarding a client’s accounting for its transactions with a foreign supplier. You will write a short memo to communicate your findings to your audit manager.

ACCT 433 Advanced Financial Accounting p. 1 of 3

ASC Research Case Assignment

Case learning objective: Following on your understanding of ch.11 Foreign Currency

Transactions, for this writing assignment you will research the FASB Accounting Standards

Codification (ASC) for authoritative guidance regarding a client’s accounting for its transactions

with a foreign supplier. You will write a short memo to communicate your findings to your audit

manager.

This assignment is due in class on Friday November 15, 2019. Limit your response to 2 to 3 pages

double spaced, single sided, Times New Roman 12pt, and stapled (submit paper only). Prior to

submitting your assignment in class, please upload your case to SafeAssign on Blackboard. Late

cases will not be accepted (except extraordinary circumstance).

Technical content will be evaluated for information that is helpful to the reader and clearly

relevant to the issue (including citation references to appropriate sections of the ASC). Writing

skills will be evaluated for development, organization, use of standard English (punctuation,

grammar, spelling), and the appropriate expression of ideas in professional correspondence.

Your writing quality will be assessed by a writing consultant. You will earn the following points

based on their assessment: Highly competent – 12 points, Competent – 9 points, Marginally

Competent – 6 points, Not Competent – 0 points.

This is a research assignment and reference (citation) to the appropriate sections of the

FASB ASC is required. Citation to the ASC should take the form ASC 123-45-67-89 and be

included within the text of your response (no footnotes or list of citations). Do not include

quotation from the ASC. Use your own words.

Acct 630/433 Case Assignment p. 2 of 3

The Accounting Standards Codification: All authoritative US GAAP has been reorganized and is

now contained in only one location: the FASB Accounting Standards Codification (ASC). The

ASC is the only source of US GAAP. All other literature is nonauthoritative.

FASB Accounting Standards Codification Topic structure:

General Principles 100-199

Presentation 200-299

Assets 300-399

Liabilities 400-499

Equity 500-599

Revenues 600-699

Expenses 700-799

Broad Transactions 800-899 (including foreign currency matters)

Industry 900-999

Example 1 of ASC citation:

What citation from the ASC provides GAAP guidance for a change in

depreciation methods from double-declining balance to straight-line?

Answer: FASB ASC 250-10-45-18.

Example 2 of ASC citation:

Wilson Corporation has several consolidated subsidiaries. As you search the professional

literature (ASC), what citation explains how intercompany transactions (e.g. intercompany

inventory sales) are treated for financial reporting purposes?

Answer: FASB ASC 810-10-45-1

CASE ASSIGNMENT

Electro-Motive Corporation is a leading distributor of aircraft

maintenance equipment and services. You are a member of the

audit team from an independent CPA firm which is engaged to

audit the financial statements of Electro-Motive.

Electro-Motive has established a business relationship with a

manufacturing company in France to purchase aircraft parts

which Electro-Motive will resell to its business customers. As

part of the business arrangement, payments by Electro-Motive

are due 60 days after receipt of the merchandise, whose cost is

quoted and payable in Euros.

Electro-Motive records the purchases in inventory when it

receives the merchandise and records a liability to the French

company, using the exchange rate for Euros on the date the

inventory purchase is recorded. When payment is made, Electro-

Motive debits or credits to inventory any difference between the

liability previously recorded and the dollar amount required to

settle the liability in Euros. Electro-Motive uses a perpetual

inventory system and the FIFO method of inventory costing and

can easily trace these adjustments to the specific inventory

purchased.

Required

accounting standards in the FASB codification. As a staff

accountant with the auditing firm that audits Electro-Motive’s

annual financial statements, write a memo to Kate Shelly, the

manager in charge of the audit, discussing the client’s

accounting for its transactions with the French supplier.

Support any recommendations with ASC citations within the text

of your memo.