Establishment of GAAP

Paper Summary:

This paper discusses the set of accounting standards that are generally accepted and universally practiced, which the accounting profession has attempted to develop. The paper describes the background of these generally accepted accounting principles (GAAP) and their intended purpose. The paper also discusses the effectiveness of GAAP within the accounting profession.

From the Paper:

"Their main focus is on the Division of Corporate Finance. Its jobs are to verify that the annual reports of companies have not lied to or misled investors, to review filings related to mergers and acquisitions, and to register new securities. One of the divisions major accomplishments is that it "provided administrative interpretations of the Securities Act of 1933, the Securities Exchange act of 1934, and recommends regulation to implement these statues." (Bateman) With these interpretations, the division makes rise of the Office of Chief Accountant. This office is the advisor to the commission on auditing and accounting matters. This office also works with private-sector auditing and standard-setting bodies like Financial Accounting Standards Board, or FASB and the American Institute of Certified Public Accountants, or AICPA. The SEC, FASB, and AICPA all work to address problems that arise from the current accounting standards. The SEC could not possibly manage all the accounting problems that arise alone. This is why they need help from the AICPA and FASB. GAAP is then formed when the SEC agrees with the decision made by the AICPA and FASB and implements the decision."

Sample of Sources Used:

• Academic Brass, United States accounting Standard- An overview of GAAP. March 2004, http://www.ala.org.ala.rusa.rusaourassoc/rusasections/brass/brasspubs/academicbrass/acadarchives/acadbrassv1n4/acadbrass1n4a2.htm
• American Institute of Certified Public Accountant, what Does AcSEC Do? 2005. http://www.aicpa.org/members/div/acctstd/whatdoes.asp Washington, DC: AICPA
• Bateman & Co., Inc., P.C. Certified Public Accountants, A History of accounting & Auditing Standards. 2005 http://www.batemanhouston.com/newsStds.htm Houston, TX: Bateman & Co., Inc.
• Financial Accounting Standards Board, FASB Facts.2005 http://www.fasb.org/facts/ Washington, DC: FASB
• Kieso, Donald, E., Jerry J. Weygant, and Terry D. Warfield, eds. 2004. Intermediate Accounting. 11th Edition, Hoboken, NJ: John Wiley & Sons, Inc.

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