Читать книгу Financial Accounting For Dummies - Maire Loughran - Страница 89

GAAP define for financial accountants the acceptable practices in the preparation of financial statements in the United States. The preponderance of the information I provide in Parts 3, 4, and 5 of this book directly ties back to GAAP. Specifically, GAAP tell financial accountants exactly how financial data has to show up on the income statement, balance sheet, and statement of cash flows.

For example, GAAP state that assets, liabilities, and equity go on the balance sheet and not on the income statement. GAAP are also pretty darn picky as to how these accounts are arranged on the balance sheet (see Part 3). In addition, GAAP give specific rules for separating operating revenue (which is related to the business purpose) from non-operating revenue (non-business-related revenue, such as profit from selling a company asset), which I explain in Chapter 7.

Like most things in life, there are exceptions to the rule that all businesses must follow GAAP. Some businesses can deviate from GAAP, a topic that will be briefly covered in your financial accounting course. However, your financial accounting class likely won’t concern itself much with these exceptions to the GAAP rule.

Are GAAP the same for public and nonpublic companies? For now, yes. FASB sets accounting and reporting standards for both, which also include not-for-profit organizations. The SEC has the statutory authority to set accounting standards for publicly held companies, but historically it has relied on private sector bodies to set those standards.

Accounting and reporting for not-for-profits are topics outside the scope of this book, and you won’t be tested on it in your financial accounting course. The only takeaway you need to have is that not-for-profits use fund accounting. For example, donations to neuter shelter animals go into a restricted fund to be used for that purpose only. Not-for-profits generally do not report net income.

In the past, establishing and modifying GAAP were collaborative efforts among several different standard-setting bodies: the FASB, the EITF, and the AICPA. At the AICPA, this task fell specifically to the Financial Reporting Executive Committee (FinREC), which is a senior technical committee composed of a Chair and 15 members.

But hold onto your hats! How financial accountants view GAAP changed in 2009 with the adoption of FASB Accounting Standards Codification. As of July 1, 2009, the FASB Accounting Standards Codification (ASC) became the single source of non-governmental authoritative GAAP in the United States. Before you get in a dither, keep in mind that the ASC doesn’t change GAAP; the FASB didn’t rewrite all the accounting rules as of July 1, 2009. Instead, the ASC organizes GAAP in a more user-friendly fashion and (mercifully) uses a consistent format across the board for all GAAP topics.