Generally Accepted Accounting Principles
Generally Accepted Accounting Principles (GAAP)[edit | edit source]
GAAP is main U.S. standard for Financial Reporting. It is concern with establishing when an item is recorded on financial statements, how an item is recorded on financial statements and disclosing additional information not specifically on the financial statements.
- GAAP history and organizations
- In 1933 congress formed the SEC with the authority to establish GAAP, The SEC delegates this responsibility to the FASB (Financial Accounting Standards Board). The SEC though is the enforcement entity of GAAP with the Full weight of the US government.
- FASB set the standards for GAAP and its mission is to improve the usefulness of financial reporting, addressing deficiencies, and promoting international convergence.
- How does FASB establish GAAP standards
- A new project is added to the agenda
- they conduct research and issues a discussion memorandum
- they hold public hearings on the topic
- they evaluate research and comments from interested parties (industry expert's) and then issue a exposure Draft, this is the first version of the new standard
- they request additional comments from the community and modify the exposure draft
- they then vote on the matter majority being 4 out of 7 FASB members. If approved a new standard is added to the codification as an Accounting standard Update (ASU)
- Two types of GAAP
- Authoritative the formal filing of standards which is includes the FASB Accounting standards Codification. Which the SEC is consider as authoritative guidance for public companies.
- Non-Authoritave which cover new and emerging issues with in accounting these can come in the form of FASB Concepts, AICPA issue papers, IFRS.