...Generally Accepted Accounting Principles (GAAP) is the standard platform of guidelines that governs the rules of financial accounting utilized in the preparation of financial statements. The US GAAP can be quite flexible in its interpretations and rulings, but the framework of GAAP is based upon certain constraints and principles in the preparation of financial reports. This paper shall endeavor to address the organization of GAAP and some of the specific areas of its governing responsibility. BODY GAAP is defined as a set of accounting patterns that are required to prepare and report the financial statements of public and private companies and non-profit organizations in the United States. It hand down the standards and rules for the aid of accountants so that they can record and prepare a summary of their transactions, for their financial statements. The Governmental Accounting Standards Board (GASB) in the United States is responsible for codifying the rules of GAAP that is referred to as US GAAP. In the United States, the American Institute of Certified Public Accountants (AICPA), The Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) provide guidance, assistance, and enforcement of the standard acceptable practices of accounting. GAAP is used to prepare all the financial documents of a company and increase its understandability and faithfulness for the investors. Without GAAP, companies would not have to follow a standard...
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...Item | IFRS | US GAAP | Other comprehensive income | 1. Combine with income statement and present a single statement of comprehensive income 2. OR present separately | Report in the statement of shareholder’s equity | FS standards | Income, expenses | 1. Revenues, expenses, gains, losses 2. Use probable in definition of A/L 3. Not allow revaluation of most assets | Completed-contract method | Recognize revenue = cost for each period, recognize profit at completion | Recognize revenue, cost, profit all at completion | Barter transaction | Recognize revenue on fair value of revenue from similar nonbarter transactions with unrelated parties | 1. recognize revenue at fire value only if the firm has historical received cash payment and can use historical experience to determine FV 2. OR record at the carrying amount of the asset surrendered | Inventory | 1. FIFO, weighted average cost 2. Lower of cost or net realizable value (NRV = selling price – completion cost – selling cost) 3. Write down, write up | 1. FIFO, weighted average cost, LIFO 2. Lower of cost or market (market = replacement cost, NRV – normal profit margin < market < NRV) 3. Write down, no write up | PPE | 1. Cost model（historical cost – accumulated dep, amo, loss） 2. OR revaluation model (fair value – accumulated depreciation) 3. Allow impairment loss recovery | Cost model | Investment property | 1. Include assets that generate rental income or capital...
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...77–92 American Accounting Association DOI: 10.2308/iace-50298 Going Concern Designations and GAAP versus Non-GAAP Earnings Metrics James L. Bierstaker, Thomas F. Monahan, and Michael F. Peters ABSTRACT: Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the ‘‘Street.’’ Based on the facts of an actual company and utilizing the financial information drawn from this company’s 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach...
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...Devine Hamdani 10/1/11 Project 1 US GAAP Convergence with IFRS As the business world has become more global, regulators, investors, large companies and auditing firms began to realize the importance of the establishment of a single set of high quality accounting standards. With a common accounting language around the world, investors will be able to have greater comparability and greater confidence in the transparency of financial reporting worldwide. IFRS, acronym for International Financial Reporting Standards are financial reporting standards that have been adopted by International Accounting Standard Board (IASB). Increasing number of publicly held companies in many countries are now requiring or allowing the use of IFRS for the preparation of financial statement. In the United States, the Securities and Exchange Commission (SEC) have also proposed a “Roadmap” in incorporating the convergence of US Generally Accepted Accounting Principles (US GAAP) to IFRS with the help of Financial Accounting Standards Board (FASB) and IASB. The IASB and FASB, committed to improving IFRS and US GAAP and achieving their convergence, are also committed in providing public transparency and accountability by reporting their process in achieving their goals. In 2006, the IASB and FASB began to set out their plans of completing major projects in their issued Memorandum of Understanding (MoU). These priority major projects comprises of their joint projects on financial instruments...
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...of IFRS and GAAP on Auditors Acc 576 Auditing and Business Concepts Abstract The convergence of IFRS and GAAP continues to present professional challenges for U.S. auditors, it also presents career opportunities for auditors who encompasses the idea of globalized change. The convergence of accounting standards is changing the attitudes of CPAs and CFOs as far as internal accounting is concerned and how the quality of the International Accounting Standards will affect it and the efforts made toward converging IFRS and the GAAP standards. Create an argument for or against the IFRS and GAAP convergence process versus a pure adoption of IFRS in the context of impact to the public accounting profession. With Business and finance globalization, almost a hundred countries have adopted IFRS. Approximately 120 nations and reporting jurisdictions permit or require IFRS for domestic listed companies, although approximately 90 countries have fully conformed with IFRS as announced by the IASB and include a statement acknowledging such conformity in audit reports. Motivations for convergence include the belief that it will result in increased comparability between financial statements, which will benefit a variety of stakeholders. One would need to weigh the benefits of a one time cost for transitioning fee, the ability to compare reports, and the benefit of using a single reporting standard for businesses. Assess the cost impact for or against IFRS and GAAP convergence...
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...practices since these decisions affect the future of the entire facility. In order to make finical decisions it is important to understand generally accepted accounting principles, corporate compliance, ethics, fraud and abuse. Generally Accepted Accounting Principles Generally accepted accounting principles are guidelines, objectives and conventions that have been set up over time to dictate how financial statements are prepared and presented (FASAB, 2010). The GAAP includes standards, conventions and the rules in which the facilities accounting department following when summarizing reports and preparing financial statements (Baker & Baker, 2011). Third parties that use these financial reports must then rely on the information to be free from all prejudice and discrepancy without debate. If the information is false then the GAAP standards were not followed and the facility is not in compliance and therefore behaving unethically (All Business, 2011). Facilities have a moral and ethical obligation to comply with GAAP in a effort to prevent outside auditors from having difficulties when examining the facilities financial reports. Reporting Standards Currently health care facilities private, public, for-profit and not-for-profit use the generally accepted accounting practices to report their financial information. However compliance is very...
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...business, and without the tracking and upkeep of funding, a company cannot run properly. According to "Healthcare Financing And Accounting " (2015), “the great thing about working in accounting is that everybody counts”. This information pretty much states and says that it doesn’t matter what part of a health care facility you may work in, all employees are a vital part of the day. Financial management involves handling routine financial operations, such as negotiating contracts, making cash available for expenses such as payroll, and maintaining a cash cushion for unexpected costs. The accounting department has a lot of responsibility and needs to be done with care, dedication, and seriousness. The Generally Accepted Accounting Principles (GAAP) are rules in which regulations and guidelines are...
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...the investors in doing their business. International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP) are two main accounting principles that is widely used in the majority of the companies. However, there will be still conflict in the interpreting and understanding each other financial statements due to these two different approaches. Therefore, to overcome this problem, International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) are working on it by taking the necessary steps as time passes to close down the gap and standardised the accounting principles globally making it easier for all parties. (157 words) 1.0 Introduction In the world of globalization, a number of countries had been experiencing the convergence of their local GAAP and IFRS in order to apply the international accounting standard to suit the growing business world. This does not left out the people of the United States who are also trying to converge the accounting standards of US GAAP and IFRS in order to close down the gap between the accounting standards. FASB and IASB are the main international bodies assisting the Securities and Exchange Commission (SEC) to achieve this goal. 2.0 Benefits 2.1 Facilitate international business and economy growth There are a number of benefits that people can gain from the convergence of US GAAP and IFRS. For example, the convergence of these accounting standards will...
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...Comparison between U.S. GAAP and International Financial Reporting Standards May 2013 © 2013 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 2 Contents 1. Introduction .................................................................................................................................................. 6 International standards and the IASB ............................................................................................................ 6 Financial accounting and reporting in the United States ................................................................................ 6 IFRS and U.S. GAAP comparison ................................................................................................................. 6 Overall financial statement presentation ................................................................................................... 8 General .......................................................................................................................................................... 8 Statement of financial position / balance sheet .............................................................................................. 9 Statement of comprehensive income / income statement ........................................................................... 12 Statement of changes in equity...
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...international relationships, especially with other EU countries where we are already present and with the USA. There are no restrictions to the importation or the exportation of capitals and goods. The accounting system follows the International Accounting Standards (IAS), the same adopted by all EU countries, and quite similar to the American’s General Accepted Accounting Principles (GAAP). There is a stable political regime with a multi-party system, which can ensure the certainty of law and the respect of contractual rights. However lawsuits tend to be lasting and expensive, and this could represent a risk in case of a contractual breach. 2) Economic Environment The Italian Economic Environment is also quite good for our project. Italian economy is based on services and industry. The per capita GDP is $30.200, that is not high as in the United States ($44.000), but which is however enough to ensure the population with the possibility to save some of their budget for the acquisition of expensive products. In addition income is better distributed than in the US: looking at the Gini Index, Italy has a 36 and US have a 45 (where 0 means equally distributed and 100 means unequally distributed). If we bear in mind the different dimensions of the two countries all the other economic indicators can be considered similar. Just the Unemployment rate is a little bit higher in Italy, 7% against 4.80%, but it is not very relevant. 3) Cultural and Social Actually Italy has a population of...
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...A major difference between GAAP and IFRS is that GAAP is rule-based, whereas IFRS is principle-based. With a principle based framework there is the potential for different interpretations of similar transactions, which could lead to extensive disclosures in the financial statements. Although, the standards setting board in a principle based system can clarify areas that are unclear. This could lead to fewer exceptions than a rules-based system. Another difference between IFRS and GAAP is the methodology used to assess an accounting treatment. The difference in research and development costs is that under IFRS costs are capitalized and under the US GAAP costs are expensed. The industries that would be most impacted are industries such as medical and technological industries that deal worldwide and have a significant portion of their clients following accounting standards of IFRs. These companies will likely have mixed feelings about the shift. Under the current US GAAP with R&D costs being expensed, US GAAP allows for a higher net income which ends up benefiting the executives as a result of cost being expensed. On the other hand, for investors and auditors purposes it will become more challenging to follow a whole new system after having learned the US GAAP. The potential downfalls are that the united states, even though merging with IFRS who has a better track record for better accounting quality, are that the united states will become slow to understanding...
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...Codification of Accounting Standards is the current single source of the United States Generally Accepted Accounting Principles (GAAP). The Codification of Accounting Standards is a database and research system created by the Financial Accounting Standards Board that combines many of the authoritative resources about accounting standards into one searchable system. Some of the people who would use the Codification are accounting and reporting professionals, financial analysts, and investors. The FASB Codification allows users to easily search and navigate the content, cutting back on research time and making access to information quicker and more efficient. It was created with the goal to simplify user access to all authoritative U.S. GAAP, reduce the amount of time and effort required to solve an accounting research issue, mitigate the risk of noncompliance, and provide real-time updates as new standards are released. The FASB Codification includes all level A through D generally accepted accounting principles (GAAP) issued by a standard setter and pronouncements issued by the FASB, the Emerging Issues Task Force (EITF), Accounting Standards Executive Committee (AcSEC), Accounting Principles Board, and relevant portion of authoritative content issued by the Securities and Exchange Commission (SEC). The Codification reorganizes the thousands of U.S. GAAP pronouncements into about 90 accounting topics. Some of its features include the ability to browse by topic, cross referencing...
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...A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses, acquirees. In mergers and acquisitions, pushdown accounting applies to the separate financial statements of an acquiree and it reflects the acquirer’s new basis of accounting for the acquiree’s assets and liabilities. It is a method of accounting that was required under US GAAP if the purchase transaction resulted in an entity becoming substantially wholly owned. The securities and exchange commission (SEC) stated that pushdown accounting was required if 95% or more of the company was acquired, permitted if 80% to 95% was acquired, and prohibited if less than 80% of the company was acquired. Generally accepted accounting principles (GAAP) offered limited guidance for determining whether and at what threshold an acquiree can reflect the acquirer’s accounting and reporting basis in its separate financial statements. The Accounting Standards Update, No. 2014 – 17, Business Combinations Topic 805 – Pushdown Accounting, made the guidance optional so the acquiree could choose based on facts and circumstances, including the user’s needs, to implement or not pushdown accounting. Control of an acquiree is obtained in various ways including: • Transfer of cash or other assets • Incurred liabilities • Issue equity interests • Providing more than one type of consideration • Without the transfer of consideration (805-10-25-11) o Acquiree repurchases a sufficient number...
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...the differences between Generally Accepted Accounting Principals (GAAP) and the International Financial Reporting Standards (IFRS). Currently, the majority of countries in the world follow International Financial Reporting Standards guidelines; however, the United States still uses Generally Accepted Accounting Principals. This topic has been a main focus because there is a plan for convergence between the two frameworks in the near future. The United States accounting system will undergo drastic changes when this occurs, but in the long-run the idea is to simplify the accounting procedures around the world. The main difference between GAAP and IFRS is that GAAP is considerably rule-based, whereas IFRS is more principal-based which means IFRS has room for interpretation. The specific differences are far too many to cover in a short presentation, however, an explanation of some major differences are mentioned below. In certain instances, GAAP and IFRS follow different approaches for the determination of specific amounts as well as how these amounts are recognized in financial statements and within the notes. One of these instances occurs in the measurement of inventory. Unlike GAAP which accepts the FIFO, LIFO, and weighted-average methods, IFRS does not accept LIFO. Also, when inventory is recorded on the balance sheet, IFRS requires that it be reported at the lower of historical cost or Net Realizable Value. GAAP, on the other hand, requires inventory to be reported at the lower...
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