3. The concept of too big to fail first distributed in 1984 with the failure of continent Illinois bank? Give an example today of who is ‘Too big to fail’ and why?

Case 1-3 Politicalization of Accounting Standards

Some accountants have said that politicalization in the development and

acceptance of generally accepted accounting principles (i.e., standard setting) is

taking place. Some use the term politicalization in a narrow sense to mean the

influence by governmental agencies, particularly the SEC, on the development of

generally accepted accounting principles. Others use it more broadly to mean the

compromising that takes place in bodies responsible for developing these principles

because of the influence and pressure of interested groups (SEC, American

Accounting Association, businesses through their various organizations, Institute

of Management Accountants, financial analysts, bankers, lawyers, etc.).

Required:

A.) Do the reasons these groups were formed, their methods of operation while in existence, and the reasons for the demise of the first two indicate an increasing politicalization (as the term is used in the broad sense) of accounting standard setting? Explain your answer by indicating how the CAP, APB, and FASB operated or operate. Cite specific developments that tend to support your answer.

B.) What arguments can be raised to support the politicalization of accounting standard setting?

C.) What arguments can be raised against the politicalization of accounting standard setting?(CMA adapted)

Case 1-6 Accounting in crisis

During the early 2000s, the role of accounting and the auditing profession changed and several accounting scandals were uncovered.

(a.) What conditions caused accounting and the audit profession role to change during this time?

(b.) What major changes occurred as a result of the accounting scandals at that time?

Case 2-2 The Theoretical Foundation of Accounting Principles During the past several years, the FASB has attempted to strengthen the theoretical foundation for the development of accounting principles. Two of the most important results of this attempt are the Conceptual Framework Project and the Emerging Issues Task Force. During this same period, the FASB has been criticized for imposing too many standards on the fi nancial reporting process, the so-called standards overload problem. Required:

a. Discuss the goals and objectives of

i. the Conceptual Framework Project

ii.The Emerging Issues Task Force

b.Discuss the standards overload problem.

Case 2-5 Definition of Assets

your company owns a building that is fully paid for. Explain how the building meets the definition of an asset under each of the following scenarios.

a. your company is using the building as a plant that is producing automobiles.

b. your company is not using the building but plans to sell it. Explain how the building meets the definition of an asset.

c. your company is not using the building but plans to remodel it so that it can be used as a plant to produce automobiles.

Case 17-4 Preparation of Footnotes

You have completed your audit of Carter Corporation and its consolidated subsidiaries for the year ended December 31, 2017, and are satisfied with the results of your examination. You have examined the financial statement of Cater for the past three years. The corporation is now preparing its annual report to shareholders. The report will include the consolidated financial statements of Carter and its subsidiaries and your short-form auditor’s report. During your audit, the following matters came to your attention.

1. The Internal Revenue Service, which is examining the corporation s 2017 federal income tax return, questions the amount of a deduction claimed by the corporation s domestic subsidiary for a loss sustained in 2017. The examination is still in process, and any additional tax liability is indeterminable at this time. The corporation s tax counsel believes that there will be no substantial additional tax liability.

2. A vice president who is also a stockholder resigned on December 31, 2016, after an argument with the president. The vice president is soliciting proxies from stockholders and expects to obtain sufficient proxies to gain control of the board of directors so that a new president will be appointed. The president plans to have a footnote prepared that would include information about the pending proxy fight, management s accomplishments over the years, and an appeal by management for the support of stockholders.

Required:

A. Prepare the footnotes, if any, that you would suggest for the foregoing listed items.

B. State your reason for not making disclosure by footnote for each of the listed items for which you did not prepare a footnote.

Case 17-10 The Ethics of Accounting Choices

The Fillups Company has been in the business of exploring for oil reserves. During 2017, $10 million was spent drilling wells that were dry holes. Under U.S. GAAP, Fillups has the option of accounting for these costs by the successful efforts method or the full‐cost method. Under successful efforts, the $10 million would be expensed once it was determined that the wells were dry. Under full cost, the $10 million would be capitalized. It would not be expensed until the oil from successful wells is extracted and sold. Fillups decides to use the full‐cost method because of its positive effect on the bottom line.

Required:

a. What are the ethical considerations implied in the rationale for Fillups s decision? Explain.

b. Do you believe that an accounting alternative should be selected solely on the basis of financial statement effects? Discuss.