Wiley GAAP: Practical Implementation Guide and Workbook

Chapter 1. RESEARCHING GAAP

BACKGROUND AND INTRODUCTION

Overview of GAAP

This chapter provides an overview of generally accepted accounting principles (GAAP), including the processes involved in its development.

GAAP Defined

The phrase "generally accepted accounting principles" is a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. It includes not only broad guidelines of general application but also detailed practices and procedures. Those conventions, rules, and procedures provide a standard by which to measure financial presentations.

—U.S. Auditing Standards Board, AU §411

OBJECTIVE OF GAAP REPORTING

Generally accepted accounting principles (GAAP) are concerned with the measurement of economic activity, the timing when such measurements are to be made and recorded, the disclosures surrounding this activity, and the preparation and presentation of summarized economic information in the form of financial statements.

There are two broad categories of accounting principles: those dealing with recognition and measurement, and those dealing with presentation and disclosure.

Recognition and measurement principles determine when and how transactions and events items enter the accounting cycle and impact the financial statements. These quantitative standards require economic information to be reflected numerically.

Presentation and disclosure principles involve qualitative considerations regarding ...