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GAAP

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What are Generally Accepted Accounting Principles (GAAP)?
How does GAAP affect financial reporting?
How does GAAP need to change to accommodate today's dynamic business environment?

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What are Generally Accepted Accounting Principles (GAAP)?
These are rules and procedures that define accepted accounting practice. This is a mix of detailed procedures and principles. These are accounting standards and principles that are used in a country. The Generally Accepted Accounting Principles provides the basis on which the financial statements are prepared. Specifically, there are principles and rules that are developed by the Financial Accounting Standards Board. This is a ...

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GAAP Adjustments in International Accounting

Ipat International Ltd provided the following reconciliation from IFRS to US GAAP in its most recent annual report.

................................................................................................................Net Income Shareholders Equity
As stated IFRS............................................................................541,713 7,638,794
U.S GAAP Adjustments
(a) Reversal of additional depreciation charges
Arising from revaluation of fixed assets..............................................85,720 643,099
(b) Reversal of revaluation surplus of fixed assets................................0 (977,240)
As stated under US GAAP .........................................................627,433 7,305,653

(a) Explain why US GAAP adjustment (a) results in an addition to net income. Explain why US GAAP adjustment (a) results in an addition to shareholders equity that is greater than the addition to net income. What is the shareholders equity account affected by adjustment (a)?
(b) Explain why US GAAP adjustment (b) results in a subtraction from shareholders equity but does not affect net income. What is the shareholders equity account affected by adjustment (b)?

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