Generally Accepted Accounting Principles is an accounting framework, which includes accounting standards and rules that every accountant needs to follow while preparing the financial statements. All companies should follow the GAAP rules and standards while presenting income & expense and asset & liabilities in the financial statement. The reporting procedures of Generally Accepted Accounting Principles are very complex in nature.
At present, there are nearly 150 pronouncements, which accountants need to use while presenting various transactions in the financial statement. Normally, a financial statement, which is produced, based on the GAAP rules will show different results when you compare the same with the financial statements produced by using British Accounting Rules. GAAP was only limited to only American companies till now but now the rules are getting modified to make the reports to match International Financial Reporting Standards. This makes easier for shareholders to compare the companies perfectly.
The information in the financial statement should be reliable and consistent. It should not give any wrong information to the shareholders or stakeholders of the company. To make the financial reporting transparent, Generally Accepted Accounting Principles are used by the accountants.
[...] GAAP, FASB and SEC Explain what is meant by Generally Accepted Accounting Principles (GAAP). Generally Accepted Accounting Principles is an accounting framework, which includes accounting standards and rules that every accountant needs to follow while preparing the financial statements. All companies should follow the GAAP rules and standards while presenting income & expense and asset & liabilities in the financial statement. The reporting procedures of Generally Accepted Accounting Principles are very complex in nature. At present, there are nearly 150 pronouncements, which accountants need to use while presenting various transactions in the financial statement. [...]
[...] SEC will have five commissioners who will be appointed by President of United States of America. All the commissioners are political leaders and not more than three members will be from the same political party. This rule is to make SEC as a non-partisan. In light of the ongoing economic crisis, do you think these organizations are doing a good job? Why or why not? I don't think the regulatory bodies like SEC and GAAP are not doing great in mitigating the risk of ongoing economic crisis. [...]
[...] What is the FASB, and what does this organization do? FASB is abbreviated as Financial Accounting Standards Board. FASB was designated by Security and Exchange Commission to help public companies to prepare the financial or accounting statements as per the rules of Generally Accepted Accounting Principles (GAAP). The main aim of FASB is to improve the standards of financial statements by educating privately owned and non profit organizations. The major goals of SASB are Making financial reports reliable and consistent Helping companies to produce the accounting statements as per the rules of GAAP Educating companies regarding the importance of transparent financial reporting FASB is not a public body. [...]
[...] The auditors did not disclose the information that could have helped stakeholders to understand what exactly happening with Lehman Brothers. In a nutshell, the bankruptcy of Lehman discloses the auditor's failure in examining the assets and liquidity to reach actual value. We obviously need to question the role of regulatory bodies at this juncture because it is their responsibility to look after such major issues. Lehman Brother's bankruptcy is the perfect example for failures of regulatory bodies. References Elliot, Barry & Elliot, Jamie (2004). Financial accounting and reporting. [...]
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