3. The Financial Accounting Standards Board
FASB
The body that developed Generally Accepted
Accounting Principles (GAAP)
4. The Seven Key Components of The General Purpose
of External Financial Reporting - GAAP
• Income Statement
• Balance Sheet
• Statement of cash flow
• Statement of Retained Earnings
• Statement of Comprehensive Income
• Footnotes Disclosure and Supplement Schedules
• Auditor’s Opinion
5. GAAP
• Principles
• Methods
• Procedures &
• Pronouncements issued by
• Committee on Accounting Procedure (CAP)
• Accounting Principles Board (APB)
• Financial Accounting Standards Board (FASB).
The FASB Codification is the sole authoritative
source for such GAAP and includes guidance from
the above sources. For publicly traded entities, the
SEC has additional reporting guidelines.
6. Authoritative GAAP
• FASB –Accounting standard codification
compilation of pronouncements issued by FASB,
APB, CAP.
• Non – Authoritative FASB concepts, AICPA
Issues paper, IFRS.
• SEC Guidance – Considered part of Authoritative
GAAP for public companies.
7. Topics that Financial Accounting Standards Board
(FASB) Accounting Standards Codification not include.
• Other comprehensive basis of accounting
• Cash basis
• Income tax basis
• Regulatory accounting principles
8. Securities and Exchange Commission (SEC).
• The agency that enforces Generally Accepted
Accounting Principles.
GAAP
9. Accounting Principles Board- (APB)
• The entity that published thirty-one opinions, some
of which are now part of the Codification.
10. Accrual Basis of Accounting
• GAAP, and therefore the financial statements, reflect the
accrual basis of accounting rather than the cash basis of
accounting. Both U.S. and international GAAP reflect the
accrual basis of accounting.
• Under the accrual basis, revenues are recognized when
earned, regardless of the period of cash collection.
• Expenses are recognized when incurred, regardless of the
period of cash payment.
• The accrual basis of accounting is preferred over the cash
basis of accounting because it reflects a better association
of revenues and expenses with the appropriate accounting
period.
• The accrual basis of accounting recognizes all resource
changes when they occur. The cash basis of accounting
limits the recognition of resource changes to cash flows.
11. Accrual Basis Accounting
• Recognizes and reports the economic activities of
the firm in the period the activity was INCURRED,
REGARDLESS of when the cash activity takes
places.
• Accrual Basis accounting is the HEART and
SOUL of the matching concept and financial
reporting.
18. Current Assets
• Are in the form of cash, or
• Will be converted into cash, or
• Consumed within one year or
• The operating cycle of the business, whichever is
longer.
19. Long-term assets
• Assets that are not classified as current assets.
• Long-term assets are reported on the balance
sheet and represent a company's property,
equipment, and other capital assets (reduced by
depreciation) expected to be useable for more
than one year.