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What Is GAAP? Empty What Is GAAP?

Mon Nov 21, 2022 9:00 am
The full form of the term is Generally accepted accounting principles, these are the guiding principle under which businesses, companies etc report to the public, lenders, creditors etc. These sets of rules have been placed by the Financial Accounting Standards Board (FASB) and Securities and Exchange Commission (SEC). who are also responsible for their enforcement and shaping of them.
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What Is GAAP? Empty Re: What Is GAAP?

Thu Nov 24, 2022 11:28 am
Its all well and good to look at the principles of GAAP but it has a few limitations as well such as

GAAP is not global
The generally accepted accounting principles are not globally recognized as the standard for preparing financial reports. This can make using GAAP challenging for organizations that are international or are becoming more globalized. Outside of the U.S., the International Financial Reporting Standards is the set of principles most commonly used by organizations.

One-size-fits-all approach
GAAP tends to take a "one-size-fits-all" approach rather than accounting for the immense diversity that is often seen between companies. As a result, using these principles can be difficult for companies in certain industries as well as for smaller businesses. For example, a small business using the generally accepted accounting principles may find GAAP too complex and struggle to incorporate all the principles into its basic financial records.

Long wait times for new standards
GAAP policy boards go through rigorous deliberation and an extensive process to set new standards for the generally accepted accounting principles. As a result, companies who use these principles may be negatively affected when new standards are being put into place because they would have to wait for the standards to be approved before being able to implement them.
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