Definition and Governing Bodies GAAP PowerPoint 1 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 transact ID: 1003015
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1. 1.01 Generally Accepted Accounting Principles – Definition and Governing Bodies GAAP PowerPoint #1
2. Generally Accepted Accounting PrinciplesDefined 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 statementsWhat is GAAP?
3. AICPA FASBSECDefine: SecuritySecurities Act of 1933Securities Act of 1934GASBGoverning Bodies of GAAP
4. American Institute of Certified Public Accountants (CPA)Founded in 1887Sets ethical standards for the CPA profession Sets U.S. auditing and GAAP standardsDevelops and grades the Uniform CPA Examinationhttp://www.aicpa.orgAICPA
5. Financial Accounting Standards BoardEstablished in 1973Establishes and improves standards of financial accounting by non-governmental entities (GAAP)www.fasb.orgFASB
6. Securities and Exchange CommissionCreated by the Securities Act of 1933 and the Securities and Exchange Act of 1934Holds the primary responsibility for:Enforcing federal securities lawsRegulating the securities industryRegulating the stock market andPreventing corporate abuse of investorsSEC
7. Enforcement authority granted by CongressBring civil enforcement actions against individuals and companies who:Commit accounting fraudProvide false informationEngage in insider tradingViolate securities lawsBring criminal enforcement actions to prosecute individuals and companies for criminal offensesSEC Authority
8. Maintains fair, orderly and efficient security marketsEnsures that securities industry professionals deal fairly with their customersEnsures that corporations make all material information about themselves publicFacilitates capital formation for corporationswww.sec.govSEC Objectives
9. notesstock treasury stock security future bond debenture certificate of interestparticipation in any profit-sharing agreementSecurities
10. Referred to as the Truth in Securities LawTwo basic objectives:Requires that investors receive financial/significant information concerning securities offered for public saleProhibits deceit, misrepresentations, and fraud in the sale of securitiesSecurities Act of 1933
11. Empowers the SEC with broad authority over the securities industryIncludes the power to register, regulate, and overseeBrokerage firmsTransfer agentsClearing agenciesSelf-regulatory organizationsNew York Stock ExchangeAmerican Stock ExchangeNASDAQEmpowers SEC to require periodic reporting by companies with publicly traded securities (GAAP)Securities Act of 1934
12. Governmental Accounting Standards BoardEstablished in 1984To establish and improve standards of state and local governmental accounting and financial reporting (GAAP)www.gasb.orgGASB
13. 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.Questions for Understanding and Discussion