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Respond to... 

Accounting standards in the U.S.  are referred to as Generally Accepted Accounting Principles (GAAP).  While there are several GAAP principles, some of them include the historical cost principle, the fair value principle, the full disclosure principle, revenue recognition principle, and matching principle (Kumaran, 2015).  Some of the most common principles used are the historical cost principle, the fair value principle and the full disclosure principle. The historical cost principle’s purpose is that companies use their cost while recording assets. The fair value principle’s purpose is for assets and liabilities to be reported at fair value. Historical cost principle is more commonly used since fair value principles are based on market values, which may not be accurate. There is a full disclosure principle which purpose is to reveal all conditions that affect the financial statement. This will hold true where the data was not clear in in the financial statement (Kimmel, Weygandt, & Kieso, 2019). 

         Generally Accepted Accounting Principles (GAAP) refer to accounting practices in the U.S. which are developed and governed by the Financial Accounting Standards Board. For International standards, the International Financial Reporting Standards (IFRS) are used which were developed by the International Accounting Standards Board. The GAAP and the IFRS work together so that each standard is complimentary to the other. Because of this, foreign countries doing business in the U.S. are permitted to maintain compliance to the IFRS only (Kimmel, Weygandt, & Kieso, 2019). 

            Not all companies are required to following the GAAP P principles. Due to the Sarbanes-Oxley (SOX) Act, only publicly traded companies must comply because they protect investors and stakeholders of the company by keeping the business transparent (Kimmel, Weygandt, & Kieso, 2019). 

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2019). Financial accounting: Tools for business decision making (8th ed.). Retrieved from https://www.vitalsource.com.

Kumaran, S. (2015). The ten generally accepted accounting principles (GAAP). Invensis. Retrieved from https://www.invensis.net/blog/finance-and-accounting/ten-generally-accepted-accounting-principles-gaap/

Respond to... 

The Generally Accepted Accounting Principles, or GAAP, are standards that the financial industry has put forth as guidance to standardize and authenticate financial reporting in the United States.  These standards outline what is considered good reporting practices for businesses and allows interested parties the ability to compare and contrast the information within the company as well as to its peers.  As Kimmel, Weygandt, and Kieso (2019) point out, the GAAP standards are managed by the Financial Accounting Standards Board, or FASB. 

I mentioned that GAAP standards what the United States uses to standardize reporting because they only apply domestically.  Their international counterpart are the International Financial Reporting Standards, IFRS.  Those are managed by the International Accounting Standards Board, or IASB.

The SEC mandates that any publicly traded company in the United States must comply with GAAP.  International companies located outside of the United States are exempt as long as they conform to the IFRS.

Reference

Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2019). Financial accounting: Tools for business decision making (8thed.). Retrieved from https://vitalsource.com