Who Founded the GAAP?

If you're an accountant or studying accounting as a profession, you have probably heard of the GAAP (Generally Accepted Accounting Principles). This is the set of rules that all public accountants in the United States must live and work by. You may already know what these GAAP rules are, but where did they come from? Who established these rules that all CPAs are expected to follow?

Identification
1. GAAP stands for Generally Accepted Accounting Principles. This is the set of guidelines that accountants in the United States must follow. This set of principles includes very specific rules regarding full disclosure of finances; periodicity; continuity of asset values; prudence; non-compensation of debts or costs with assets and revenues; permanence of a company's methods; sincerity; consistency; and regularity.

Significance
2. The GAAP was created to protect companies, investors and other stakeholders, especially as the accounting practices of businesses can sometimes be questionable. These general accounting principles help hold companies responsible for their financial reporting activities. But inquisitive minds will want to know more. What are the origins of these accounting principles? Who came up with the GAAP, and why do we follow them?

American Institute of Certified Public Accountants
3. The American Institute of Certified Public Accountants (AICPA) is a group of CPAs who originally set out the guidelines by which all accountants must practice. Since accountants knew the field best, at the time it was natural for them to hold the monopoly on setting out these principles. The authoritative committee that was originally responsible for defining accounting principles for the AICPA was the Committee on Accounting Procedure (1936-1959). It was soon replaced by the Accounting Principles Board of the AICPA, which was established in 1959. Until the 1970s, the Accounting Principles Board was responsible for establishing the principles that all American accountants should follow. But in 1973, the AICPA and Accounting Principles Board had to transfer this responsibility to the Financial Accounting Standards Board, a nonprofit company that was appointed by the Securities and Exchange Commission (SEC).

com http://www. or generally accepted accounting procedures.Financial Accounting Standards Board 4. Nineteen statements remain in effect as a part of the FASB's Generally Accepted Accounting Principles. Why Did the FASB Replace the AICPA? 5. smaller nonprofit board would be able to more efficiently develop accounting principles. stakeholders and the general public. The American Institute of Certified Public Accountants designated the Financial Accounting Standards Board to oversee the guidelines for financial reporting at the federal level. educate and protect the public.ehow. state and local entities are called GAAP.com/about_4706103_whofounded-gaap. GAAP is created and monitored at two levels. (Follow the link in Resources for the most current list of accounting principles. This includes publicly traded companies operating under the Securities and Exchange Commission guidelines. . The purpose of the FASB is to set accounting standards that will accurately inform. federal. The SEC believed that this new appointment would be a more successful alternative for public accountants. It's almost as if an invisible hand is guiding a process and overseeing its successful implementation.html#ixzz0wt1DfaJe Who Currently Develops the GAAP? In many situations there are rules. The rules that guide the financial reporting functions of profit. The Financial Accounting Standards Board (FASB) was appointed by the SEC in 1973 to take over the development of GAAP rules in the United States.) Read more: Who Founded the GAAP? | eHow. GAAP is monitored at the state and local level by the Governmental Accounting Standards Board. but the creators of the rules are sometimes unknown. The SEC replaced the AICPA with the FASB in 1973 because it felt that this new. Identification 1. The FASB is overseen by the Financial Accounting Foundation (FAF). The original 31 statements created by the Accounting Principles Board were largely accepted by the new FASB. They are the result of the joint cooperation of three distinct organizations. non-profit.

 As the world evolves. The rule-making process is transparent to everyone. By the year 2016. What if. a potential investor was comparing balance sheets for two corporations and one balance sheet didn't include current assets while the other included all assets? The investor wouldn't have an accurate perspective for comparison. Risk Factors  Failure to maintain a standard accounting procedure would cause havoc in the investment industry. Automatic internal checks and balances exist among the organizations.Benefits 2. all US companies operating outside of the US will have to adhere to International Financial Reporting Standards. Considerations . and vice versa. Companies enter the world market on a daily basis. When this occurs. companies have to adhere to international accounting standards. for example. Consumers and all other stakeholders have confidence that financial information is disseminated in a standard and efficient manner. The benefits of multiple organization developing GAAP procedures are varied. so does GAAP. Practitioners at the local and state level have access to the process at the federal level. 3. 4.

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