Financial Accounting Issues -

Financial Accounting Issues

Introduction

GAAP is an acronym for generally accepted accounting principles. It’s made up of a series of commonly used accounting rules and practices for financial reporting. These specifications include the accounting terms definitions and the concepts, principles as well as the general accounting rules. The objective of GAAP is to ensure that there is a standard in all companies concerning financial reporting which should be transparent and consistent from one company to the other. (Economist.com, 2008)

International Financial Reporting Standards began initially as an attempt to converge accounting across the EU but the approach of the harmonization concept became attractive to other nations worldwide. It was originally known as IAS i.e. International Accounting Standards which began and operated between the years 1973 to the year 2001 before IFRS was developed.

International Financial Reporting Standards are basically designed as a common financial global language for business operations so that a firm accounts are interpreted and compared uniformly all over the world. They are as a result of growing and expanding international shareholding in businesses and other related trading activities worldwide. IFRS is progressively and gradually replacing different national financial or accounting standards globally. All IFRS converge at developing acceptable, comparable, relevant and reliable financial standards universally.

Generally Acceptable Accounting Practices

a) Level 1 (one) pronouncements includes;
GASB Statements or GASB Technical Bulletin
GASB Interpretations www.Governmental Accounting Standards Board (GASB)
FASB pronouncements and if made applicable by the GASB
Government Accounting Textbook.
b) Level two (2) pronouncements are then followed if level one (1) provides no guidance. These are;
Widely recognized industry practice (GASB Technical Bulletins)

http://www.portlandonline.com/Auditor/Index.cfm?a=54193&c=34747

AICPA Industry Audit and Accounting Guides
AICPA issue paper of position if they apply to the state and the local governments have been generally cleared by the GASB.
AICPA Practice Bulletins (applying specifically to state and local government
c) Level Three (3) pronouncements are generally followed when level 1 and 2 provide no clear guideline. At the moment there is no level 3 pronouncement in effect. Future guidelines will include;
GASB Statement which includes GASB Emerging issues Task Force consensus positions.
GASB Q and Answers
International Accounting Standards Committee Statements

www.International Financial Reporting Standards. (IFRS)

AIPCA Statements of Position (applying specifically to state and local government)

Www. American Institute of Certified Public Accountants (AICPA)

d) Level 4 guidelines apply when the levels 1, 2, and 3 provide no guidance. This includes;
Position statement from GASB Emerging Issues Taskforce
Article in a leading audit journal (consistent with GAAP)
FASB Statement www.Financial Accounting Standards Board (FASB)
Leading accounting textbook (Hermanson, Edwards, & Invacevich, 2011)
e) Other accounting literature or sources that provide the lowest or minimum level of guidance. These are;
GASB Concept Statements
GASB Technical Bulletin
FASB Technical Bulletin
Speech from a leading accounting professor.

www.United States Securities and Exchange Commission (SEC)

References

Economist.com, “Closing the GAAP: America embraces international accounting

standards.”Economist.com. 28 Aug 2008. Economist.com, Web. 17 July 2009.

<http://www.economist.com/displaystory.cfm?story_id=12010009>.

Hermanson, R.H., Edwards, J.D., & Invacevich, S.D. (2011). Accounting Principles: A Business Perspective. First Global Text Edition, Volume 2 Managerial Accounting, 37-73.

http://www.portlandonline.com/Auditor/Index.cfm?a=54193&c=34747

www.United States Securities and Exchange Commission (SEC)

www.American Institute of Certified Public Accountants (AICPA)

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