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Who's In Charge?
In the United States, a company that offers its common stock to the publictypically needs to file periodic financial reports with theSecurities and ExchangeCommission(SEC). We will focus on the three important reports outlined in thistable:
Filing IncludesMust be filed withSEC10-KAnnualReportAudited financialstatements,management discussion& analysis (MD&A) andschedulesWithin 90 days offiscal year end(shortens to 60 daysfor larger companies,as of Dec. 15, 2005)10-QQuarterlyReportUnaudited financialstatement and MD&A.Within 45 days offiscal quarter(shortens to 35 daysfor larger companiesas of Dec. 15, 2005.)14A ProxyStatementProposed actions takento a shareholder vote,company ownership,executive compensationand performance versuspeers.Ahead of the annualshareholders'meeting, filed whensent to shareholders.The SEC governs the content of these filings and monitors the accountingprofession. In turn, the SEC empowers theFinancial Accounting StandardsBoard(FASB) - an independent, nongovernmental organization - with theauthority to update U.S. accounting rules. When considering important rulechanges, FASB is impressively careful to solicit input from a wide range ofconstituents and accounting professionals. But once FASB issues a finalstandard, this standard becomes a mandatory part of the total set of accountingstandards known asGenerally Accepted Accounting Principles(GAAP).
Generally Accepted Accounting Principles (GAAP)
GAAP starts with a conceptual framework that anchors financial reports to a setof principles such as materiality (the degree to which the transaction is bigenough to matter) and verifiability (the degree to which different people agree on
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