Discuss the role of each of the following in the formulation of accounting principles:
a. American Institute of Certified Public Accountants
b. Financial Accounting Standards Board
c. Securities and Exchange Commission
How does the concept of consistency aid in the analysis of financial statements? What type of accounting disclosure is required if this concept is not applied?
The president of your firm, Lesky and Lesky, has little background in accounting. Today, he walked into your office and said, ‘‘A year ago we bought a piece of land for $100,000. This year, inflation has driven prices up by 6%, and an appraiser just told us we could easily resell the land for $115,000. Yet our balance sheet still shows it at $100,000. It should be valued at $115,000. That’s what it’s worth. Or, at a minimum, at $106,000.’’ Respond to this statement with specific reference to the accounting principles applicable in this situation.