The Governance of GAAP.
The Governance of GAAP: In the United States, the Generally Accepted Accounting Principles are a set of standards and rules that direct accountants on the methodology of proper transaction recording and preparation of proper financial statements.
GAAP functions to satisfy the need of the society and therefore, these principles evolve according to the changes in the economic environment. For this reason therefore, there is no single source for the authority of GAAP.
GAAP derives its authority from the official pronouncements by accounting standard setting organizations such as the Financial Accounting Standards Board (FASB) and US Securities and Exchange Commission (SEC).
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specific guidelines mainly GAAP to address them. The SEC is also the main enforcing organization for GAAP within the industry and provides funding for the GAAP regulation (Warren, Reeve, & Duchac, 2011).
Other organizations that give precedence to GAAP include the American Institute of Certified Public Accountants (AICPA), Governmental Accounting Standards Board (GASB), Government Finance Officers Association (GFOA), American Accounting Association, Financial Executives Institute, and Institute of Management Accountants.
The GAAP also derives its authority form industry practice though in some instances. This practice has been touted to cause conflicts and lack of consistency within GAAP. Since the practices serve the interests of various parties. However, the GAAP still relies on industry practices but in moderation. Lastly, the authority of GAAP also comes from credible and peer reviewed Accounting literature.
Mirza, A. (2012). International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP. Hoboken, NJ: John Wiley & Sons.
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