The purpose of this paper is to determine why the Financial Accounting Standard Board (FASB) set-up the codification of Generally Accepted Accounting Principles (GAAP).
In the following paragraphs the purpose and reason are defined. The break-down of the nine main areas are described with a break-down of each area. An accounting professional will use these areas many times in his or her career, so the knowledge offered is important. The FASB codification system is a database system set-up for the authoritative combination of GAAP to be found in one place. A person does not have to search several sites and accounting board standards to find accounting information. “This site is designed to allow users to offer feedback, perform research, and view site contents” (About the FASB codification system, 2012, p. 1).
The objective of creating the FASB codification system is to take a large amount of accounting standards data following GAAP and reduce the standards into a simpler form for means of research.
The purpose is to develop a system that allows a user to find GAAP standards quickly with less research. This conveys the standards into an explanation that users can follow and allow comparability of interpretation instead of different interpretations of the same standards. Accounting professionals therefore, are uniformed in accounting reports and use work effectively on helping clients instead of spending time researching. There are nine content areas listed in the FASB codification system. These areas are broken-down into specific topics to allow users more quickly access to questions on standards. These nine areas are GAAP, presentation, assets, liabilities, equity, revenue, expenses, broad transactions, and industry. The explanation of these areas follows. The GAAP section contains an explanation of the GAAP with the status, overview, background, and objectives for non-governmental entities to prepare their financial statements to follow GAAP. The presentation sections give guidance on how to report for different situations ranging from discontinued operations to real estate. This section is also broken-down for specific financial statements these include the balance sheet, statement of shareholders equity, comprehensive income, and income statement.
The Essay on IFRS and GAAP Accounting Principles
IFRS is also referred to as International Financial Reporting Standards. They are set of standards of accounting developed by International Accounting Standards Board (IASA). They are becoming the standards in the globe to be used for preparation of financial statements for the public companies. IASB is independent body which sets accounting standards which is based in London (McLaughlin, 2009). ...
These statements cover the statement of cash flow, financial notes, accounting changes, risks, and more subjects that affect the financial statements. The assets focus on cash and cash equivalents, receivables, investments, inventory, other assets, deferred costs, intangibles, and property, plant, and equipment. Therefore, it covers the assets a business would use and how each should be reported in specific situations. The liabilities cover guidance for reporting liabilities for different and unusual businesses and for special liabilities, such as disposal costs, commitments, debt, and more. The equity area helps the company equity by stock dividends and stock splits, treasury stock, spinoffs, and reverse spinoffs. Another area is financial services and agriculture. Revenues specifies guidance for not-for-profits, federal governments, and health care entities. The entertainment industry or contracts can present a challenge so these areas are covered too. The financial services and real estate covers five different types of revenue accounting each. Expenses follow revenues with specifics on costs of sales and services, compensation, other expenses, research, development, and income tax.
The Essay on Introduction, review of accounting process and financial statement
Part 1 General acceptable accounting principle General accounting principles are set of rules generated by accounting board to guide accountant in preparation and reporting of financial statements. General acceptable accounting principles are accounting guidelines (GAAP) used in United States and are issued by financial accounting standard board (FASB). Other countries uses the guideline issued by ...
Broad transactions follow this, which covers 14 areas. Each of these areas covers a few to many break-downs. Some of these areas are business combinations, consolidations, financial instruments, and foreign currency. The last area is industry. This area covers specific industries of agricultures, airlines, contractors, development stage entities, entertainment, not-for-profits, and plan accounting as some. There are several more industries in this category. When looking at the branches of each this seem to explain more on reporting of financial statements, assets, liabilities, and activities for each. In conclusion, the FASB codification system is an important site for the accounting professional. The objective of the site is specific for the accounting field, and the database is simplified to allow research times to be shortened and the reporting of financial information to follow the GAAP.
References
FASB Accounting Standards Codification. (2012).
About the FASB Accounting Standards Codification Research System Website. Retrieved from https://asc.fasb.org/about FASB Accounting Standards Codification. (2012).
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