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Generally Accepted Accounting Principles (United States)
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Generally Accepted Accounting Principles (GAAP or U.S. GAAP, pronounced like "gap") is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC).[1] While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the latter differ considerably from GAAP and progress has been slow and uncertain.[2][3] More recently, the SEC has acknowledged that there is no longer a push to move more U.S companies to IFRS so the two sets of standards will "continue to coexist" for the foreseeable future.[4]
The Financial Accounting Standards Board (FASB) published U.S. GAAP in Extensible Business Reporting Language (XBRL) beginning in 2008.
History
Auditors took the leading role in developing GAAP for business enterprises.[5]
Accounting standards have historically been set by the American Institute of Certified Public Accountants (AICPA) subject to U.S. Securities and Exchange Commission (SEC) regulations.[6] The AICPA first created the Committee on Accounting Procedure in 1939 and replaced that with the Accounting Principles Board in 1959. In 1973, the Accounting Principles Board was replaced by the Financial Accounting Standards Board (FASB) under the supervision of the Financial Accounting Foundation with the Financial Accounting Standards Advisory Council serving to advise and provide input on the accounting standards.[7] Other organizations involved in determining United States accounting standards include the Governmental Accounting Standards Board (GASB), formed in 1984; and the Federal Accounting Standards Advisory Board (FASAB), formed in 1990.[8]
Circa 2008, the FASB issued the FASB Accounting Standards Codification, which reorganized the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics.[9]
In 2008, the Securities and Exchange Commission issued a preliminary "roadmap" that may lead the United States to abandon Generally Accepted Accounting Principles in the future, and to join more than 100 countries around the world instead in using the London-based International Financial Reporting Standards.[10] As of 2010, the convergence project was underway with the FASB meeting routinely with the IASB.[11] The SEC expressed their aim to fully adopt International Financial Reporting Standards in the U.S. by 2014.[12] With the convergence of the U.S. GAAP and the international IFRS accounting systems, as the highest authority over International Financial Reporting Standards, the International Accounting Standards Board is becoming more important in the United States.
Basic concepts
To achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints.
Assumptions
Principles
Constraints
Required departures from GAAP
Under the AICPA's Code of Professional Ethics under Rule 203 – Accounting Principles, a member must depart from GAAP if following it would lead to a material misstatement on the financial statements, or otherwise be misleading. In the departure, the member must disclose, if practical, the reasons why compliance with the accounting principle would result in a misleading financial statement. Under Rule 203-1-Departures from Established Accounting Principles, the departures are rare, and usually take place when there is new legislation, the evolution of new forms of business transactions, an unusual degree of materiality, or the existence of conflicting industry practices.[13]
Involved in development
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These organizations influence the development of GAAP in the United States.
Precedence of GAAP-setting authorities
In the United States, GAAP derives, in order of importance, from:
  1. issuances from an authoritative body designated by the American Institute of Certified Public Accountants (AICPA) Council (for example, the Financial Accounting Standards Board Statements, AICPA Accounting Principles Board Opinions, and AICPA Accounting Research Bulletins);
  2. other AICPA issuances such as AICPA Industry Guides;
  3. industry practice; and
  4. into para-accounting literature in the form of books and articles.
Codification in Accounting – FASB Accounting Standards Codification
The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is non-authoritative.
The Codification reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure. It also includes relevant Securities and Exchange Commission (SEC), guidance that follows the same topical structure in separate sections in the Codification.
To prepare users for the change, the AICPA[14] has provided a number of tools and training resources.
While the Codification does not change GAAP, it introduces a new structure—one that is organized in an easily accessible, user-friendly online research system. The FASB expects that the new system will reduce the amount of time and effort required to research an accounting issue, mitigate the risk of noncompliance with standards through improved usability of the literature, provide accurate information with real-time updates as new standards are released, and assist the FASB with the research efforts required during the standard-setting process.
See also
Notes
  1. ^ Posner, Elliot (2010-10-01). "Sequence as explanation: The international politics of accounting standards". Review of International Political Economy. 17 (4): 639–664. doi​:​10.1080/09692291003723748​. ISSN 0969-2290. S2CID 153508571.
  2. ^ "IFRS: Current situation and next steps", pwc.com
  3. ^ "New mechanisms eyed by FASB, IASB in long march toward global comparability", Ken Tysiac January 10, 2013, journalofaccountancy.com
  4. ^ "A U.S. Imperative: High-Quality, Globally Accepted Accounting Standards", SEC January 5, 2017, sec.gov
  5. ^ Gauthier, Stephen J. Governmental Accounting, Auditing, and Financial Reporting.
  6. ^ Financial Accounting Standards. QuickMBA.
  7. ^ Financial Accounting Standards Advisory Council (FASAC). FASB FASAC.
  8. ^ "History of FASAB". fasab.gov.
  9. ^ AICPA (February 2008). "AICPA Applauds FASB's Issuance of GAAP Codification". The CPA Letter.
  10. ^ Crovitz, L. Gordon (2008-09-08). "Closing the Information GAAP". The Wall Street Journal. Retrieved 2008-09-24.
  11. ^ Progress Report on Commitment to Convergence of Accounting Standards—June 24, 2010. FASB.
  12. ^ Jeffers, Agatha; Mengyu Wei; Sidney Askew (2010). "The Switch from U.S. GAAP to IFRS". Proceedings of the Northeast Business & Economics Association: 48–54.
  13. ^ Arens, Alvin; Loebbecke, James (1980). Auditing : An Integrated Approach. Prentice Hall. p. 56. ISBN 0-13-051656-2.
  14. ^ "FASB Accounting Standards Codification", Deloitte Global Services Limited, 2009, retrieved April 30, 2016
External links
Last edited on 28 May 2021, at 16:11
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