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GAAP, IFRS, SEC, PCAOB: Importance to financial statements

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Part I. Search the course background information, the Internet and/or the Cyber Library. Discuss the terms listed below. Your discussion should expand on the definition as given in the module background. Explain why these concepts are important to financial statements.

Generally Accepted Accounting Principles (US GAAP);

International Accounting Standards (IFRS);

Securities and Exchange Commission (SEC);

Public Company Accounting Oversight Board (PCAOB);

Annual report; and

10-K

Part II: Explain the accounting equation and prepare a table showing the equation and show a list of accounts belonging to each category in the equation. You should include at least five accounts for each category.

Part III. Comment on the primary intended audience of the financial statements. What other groups that may be interested in the financial information released by the company? Discuss.

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Part I -- Why are these important to the financial statements?

Preparing financial statements -- US GAAP & IFRS.

Financial statements are summaries of the past activities of a business (Income Statement and Cash Flow Statement) and the presentation of the economic resources and claims against those resources at exist at the end of the period reported (Balance Sheet). While this may seem basic, the actual decisions required to present this information is not obvious. For instance, should you report what you paid for an item (historical cost) or what you could sell it for now (fair value)? In order to have the financial statement comparable to each other and consistent over time, we use generally accepted accounting principles (GAAP) so that everyone uses similar procedures and rules for how and what to report.

While these "generally accepted" principles are how financial statements are crafted, the question is, generally accepted by whom? Each "promulgating body" (usually a country or region) creates their own and that created over 132 separately "agreed upon" set of rules. In the past ten years, there has been an effort to harmonized these different versions of GAAP into fewer sets of rule. The two main sets of rules for creating accounting statements are US GAAP (applies to those created in the US or ...

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