Historical cost principle requires companies to account and report assets & liabilities acquisition costs rather than fair market value.Time-period principle: implies that the economic activities of an enterprise can be divided into artificial time periods.The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation. Monetary Unit principle: assumes a stable currency is going to be the unit of record.The business will continue to exist in the unforeseeable future. Only when liquidation is certain this assumption is not applicable. This validates the methods of asset capitalization, depreciation, and amortization. Going Concern: assumes that the business will be in operation indefinitely.Revenue and expense should be kept separate from personal expenses. Business Entity: assumes that the business is separate from its owners or other businesses.To achieve basic objectives and implement fundamental qualities GAAP has four basic assumptions, four basic principles, and four basic constraints. 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. The SEC expressed their aim to fully adopt International Financial Reporting Standards in the U.S. As of 2010, the convergence project was underway with the FASB meeting routinely with the IASB. 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. GAAP pronouncements into roughly 90 accounting topics.
![generally accepted accounting principles are abbreviated as generally accepted accounting principles are abbreviated as](https://image.slidesharecdn.com/gaapistheabbreviationofgenerallyacceptedaccountingprinciple-120913234826-phpapp01/95/gaap-is-the-abbreviation-of-generally-accepted-accounting-principle-2-728.jpg)
Ĭirca 2008, the FASB issued the FASB Accounting Standards Codification, which reorganized the thousands of U.S. 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. 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. The AICPA first created the Committee on Accounting Procedure in 1939 and replaced that with the Accounting Principles Board in 1959. Securities and Exchange Commission (SEC) regulations. Īccounting standards have historically been set by the American Institute of Certified Public Accountants (AICPA) subject to U.S. 6 Codification in Accounting – FASB Accounting Standards CodificationĪuditors took the leading role in developing GAAP for business enterprises.5 Precedence of GAAP-setting authorities.