Presentation on theme: "GAAP PowerPoint #1. Generally Accepted Accounting Principles Defined as the set of accepted industry rules, practices and guidelines for financial."— Presentation transcript:
Generally Accepted Accounting Principles Defined as the set of accepted industry rules, practices and guidelines for financial accounting Includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements
American Institute of Certified Public Accountants (CPA) Founded in 1887 Sets ethical standards for the CPA profession Sets U.S. auditing and GAAP standards Develops and grades the Uniform CPA Examination http://www.aicpa.org http://www.aicpa.org
Financial Accounting Standards Board Established in 1973 Establishes and improves standards of financial accounting by non- governmental entities (GAAP) www.fasb.org www.fasb.org
Securities and Exchange Commission Created by the Securities Act of 1933 and the Securities and Exchange Act of 1934 Holds the primary responsibility for: ◦ Enforcing federal securities laws ◦ Regulating the securities industry ◦ Regulating the stock market and ◦ Preventing corporate abuse of investors
Enforcement authority granted by Congress Bring civil enforcement actions against individuals and companies who: ◦ Commit accounting fraud ◦ Provide false information ◦ Engage in insider trading ◦ Violate securities laws Bring criminal enforcement actions to prosecute individuals and companies for criminal offenses
Maintains fair, orderly and efficient security markets Ensures that securities industry professionals deal fairly with their customers Ensures that corporations make all material information about themselves public Facilitates capital formation for corporations www.sec.gov www.sec.gov
notes stock treasury stock security future bond debenture certificate of interest participation in any profit-sharing agreement
Referred to as the Truth in Securities Law Two basic objectives: ◦ Requires that investors receive financial/significant information concerning securities offered for public sale ◦ Prohibits deceit, misrepresentations, and fraud in the sale of securities
Empowers the SEC with broad authority over the securities industry Includes the power to register, regulate, and oversee ◦ Brokerage firms ◦ Transfer agents ◦ Clearing agencies ◦ Self-regulatory organizations New York Stock Exchange American Stock Exchange NASDAQ Empowers SEC to require periodic reporting by companies with publicly traded securities (GAAP)
Governmental Accounting Standards Board Established in 1984 To establish and improve standards of state and local governmental accounting and financial reporting (GAAP) www.gasb.org www.gasb.org
What is meant by GAAP? Why should all companies follow GAAP in reporting to external users of financial information? Explain the roles of each of the governing bodies in the setting of accounting standards.
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