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Accounting: What is GAAP and FASB?


(a) What are generally accepted accounting principles (GAAP)?

(b) What bodies provide authoritative support for GAAP?

(c) What elements comprise the FASB's conceptual framework?

Solution Preview

There is usually controversy in establishing standards in any field. In accounting the controversy as to whose rules should be follow and what should the rules be has been one that users of financial statements have had conflicting needs for information of various types. To meet these needs and to satisfy the reporting needs and responsibility of management, companies prepare a single set of general purpose financial statements. The users of these statements expect them to present fairly, clearly, and completely the company's financial operations.

The accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced. This common set of standards and procedures is called generally accepted accounting principles or GAAP. The term generally accepted means either that an authoritative accounting rule-making body has established a principle of reporting in a given area of that over time a given practice has been accepted as appropriate because of its universal application by several decision making groups. Although the principles and practices continue to be debated and criticized, most members of the ...

Solution Summary

This solution is comprised of a detailed explanation of what are Generally Accepted Accounting Principles (GAAP) and what bodies provide authoritative support for them. Also included is a detail explanation of what elements comprise the Financial Accounting Standards Board (FASB), what their mission is, and the three major types of pronouncements they issue. This solution also contains an attached MS Word document with more than 500 words of text.