ACCT16500 Financial Accounting & Reporting
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INTRODUCTION
Generally accepted accounting principles (GAAP) are those accounting principles that have substantial authoritative support. Substantial authoritative support is a question of fact and a matter of judgment. The accounting profession itself determines generally accepted accounting principles. The development of accounting principles began with the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Securities and Exchange Commission, the body formed to enforce the acts, was given the authority to regulate securities traded on the national exchanges. This, in essence, gave the Securities and Exchange Commission (SEC) the power to establish generally accepted accounting principles and to regulate the accounting profession. However, the SEC has seldom interfered with the accounting profession's practices of establishing generally accepted accounting principles and of self-regulation.
You
are required to suggest:
THE AICPA
The American Institute of Certified Public Accountants (AICPA) took on the role of the developer of GAAP in 1939 with the formation of the Committee on Accounting Procedures and the Committee on Accounting Terminology.
From 1939 to 1953, the AICPA issued 42 Accounting Research Bulletins (ARBs), of which 8 were on accounting terminology and 34 were on problems that the accounting profession was most concerned with at that time. In June 1953, the AICPA issued ARB 43, "Restatement and Revision of Accounting Research Bulletins," which, excluding the ARBs on terminology, condensed all prior ARBs, eliminating what was no longer applicable, clarifying what continued to be of value, and arranging the retained material by subjects. Subsequently, ARBs 44 to 51 were issued between October 1954 and August 1959. Accounting Research Bulletins that have not been modified are still an important source of generally accepted accounting principles.
In 1959 the AICPA created the Accounting Principles Board (APB). From 1959 to 1972, the APB issued 31 Opinions. Any departure from an APB Opinion must be disclosed in an entity's financial statements. Therefore, CPAs are forced to comply with the APBs or justify the departure with "substantial authoritative support." Statements of the APB that have not been superseded are considered GAAP.
FINANCIAL ACCOUNTING STANDARDS BOARD
In 1972 the Accounting Principles Board was abolished and was replaced by the Financial Accounting Standards Board (FASB), a board independent of the AICPA. Since 1973 the FASB has issued numerous pronouncements in the area of financial accounting. These include the following:
Statements of Financial Accounting Standards (SFAS)
These statements have the highest level of authority of GAAP. (See II, Hierarchy of Sources of GAAP.) They provide accounting principles and procedures on specific accounting issues. Each statement is issued after extensive research, discussion memoranda, exposure drafts, and public comments.
Interpretations
These pronouncements provide clarification of previously issued statements, including APB Opinions and Accounting Research Bulletins.
The American Institute of Certified Public Accountants (AICPA) took on the role of the developer of GAAP in 1939 with the formation of the Committee on Accounting Procedures and the Committee on Accounting Terminology.
From 1939 to 1953, the AICPA issued 42 Accounting Research Bulletins (ARBs), of which 8 were on accounting terminology and 34 were on problems that the accounting profession was most concerned with at that time. In June 1953, the AICPA issued ARB 43, "Restatement and Revision of Accounting Research Bulletins," which, excluding the ARBs on terminology, condensed all prior ARBs, eliminating what was no longer applicable, clarifying what continued to be of value, and arranging the retained material by subjects. Subsequently, ARBs 44 to 51 were issued between October 1954 and August 1959. Accounting Research Bulletins that have not been modified are still an important source of generally accepted accounting principles.
In 1959 the AICPA created the Accounting Principles Board (APB). From 1959 to 1972, the APB issued 31 Opinions. Any departure from an APB Opinion must be disclosed in an entity's financial statements. Therefore, CPAs are forced to comply with the APBs or justify the departure with "substantial authoritative support." Statements of the APB that have not been superseded are considered GAAP.
FINANCIAL ACCOUNTING STANDARDS BOARD
In 1972 the Accounting Principles Board was abolished and was replaced by the Financial Accounting Standards Board (FASB), a board independent of the AICPA. Since 1973 the FASB has issued numerous pronouncements in the area of financial accounting. These include the following:
Statements of Financial Accounting Standards (SFAS)
These statements have the highest level of authority of GAAP. (See II, Hierarchy of Sources of GAAP.) They provide accounting principles and procedures on specific accounting issues. Each statement is issued after extensive research, discussion memoranda, exposure drafts, and public comments.
Interpretations
These pronouncements provide clarification of previously issued statements, including APB Opinions and Accounting Research Bulletins.
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out following chapters:
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