1. 1.01 Generally Accepted Accounting Principles – Definition and Governing Bodies
GAAP PowerPoint #1

2. What is GAAP? 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

3. Governing Bodies of GAAP
AICPA
FASB
SEC
Define: Security
Securities Act of 1933
Securities Act of 1934
GASB

4. AICPA 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
Information for this slide was obtained from the AICPA website at

5. FASB Financial Accounting Standards Board Established in 1973
Establishes and improves standards of financial accounting by non- governmental entities (GAAP)
Information for this slide was obtained from the FASB website at

6. SEC 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
Information for this slide was obtained from the SEC website at

7. SEC Authority 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
Information for this slide was obtained from the SEC website at

8. SEC Objectives 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
Information for this slide was obtained from the SEC website at

9. Securities notes stock treasury stock security future bond debenture
certificate of interest
participation in any profit-sharing agreement
Information for this slide was obtained from the SEC website at
The stock certificate was obtained from

10. Securities Act of 1933 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
Information for this slide was obtained from the sec website at

11. Securities Act of 1934
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)
Information for this slide was obtained from the sec website at

12. GASB Governmental Accounting Standards Board Established in 1984
To establish and improve standards of state and local governmental accounting and financial reporting (GAAP)
Information for this slide was obtained from the GASB website at

13. Questions for Understanding and Discussion
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.