Introduction to GAAP Principles
GAAP consider to accounting policies and procedures that are extensively used in practice. Not like India in which accounting has its basis in law, US GAAP has included to be a collection of pronouncements issued through a specific accounting organization. US GAAP are the accounting rules employed to ready financial statements for publicly traded companies and several private companies in United States. Usually accepted accounting principles for local and state governments operates within dissimilar set of assumptions, constraints and principles as determined though the Governmental Accounting Standards Board (GASB).
In the US (United States), and in other countries practicing within the English common law system, the government does not place accounting standards, in the principle that the private sector has the good knowledge and resources. For public (listed) companies, the SEC (Securities and Exchange Commission) has the vital authority to set US accounting and financial reporting standards. The SEC (Securities and Exchange Commission) has hand over this accountability to the private sector led through the Financial Accounting Standards Board (FASB). Another private sector bodies involving the American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force(EITF) also set up authoritative accounting Standard Board(FIN) also give implementation and interpretation guidance. The Securities and Exchange Commission (SEC) has the statutory authority to establish GAAP for filings made along with it. While permitting most of the Standard settings to be completed in the private sector, Securities and Exchange Commission (SEC) is still extremely active in both its oversight responsibility in addition to establishing guidance and interpretations, because it believes suitable. US GAAP include the reputation around the world of being more perspective and detailed than accounting standards in another countries. To organize and make clear what is meant through US GAAP, a GAAP hierarchy has been established that consists of four categories of accounting principles. The sources in the higher category take more weight and must be followed while conflicts take place.
The categories provided below summaries the current GAAP hierarchy for financial statements of non-governmental entities.
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