Talk:Generally Accepted Accounting Principles (United States)

message: I think alot of people are confusing GAAP with the different standard setting bodies and their respective statements, since GAAP is much more complex and non-divisible than what the article states in my opinion. The article states that GAAP are "accounting rules used to prepare financial statements for publicly traded companies and many private companies in the United States. Generally accepted accounting principles for local and state governments operates under a different set of assumptions, principles, and constraints, as determined by the Governmental Accounting Standards Board (GASB)".
First, GAAP is the accounting rules for ALL financial statements of ANY entity (public corporation, partnership, government, sole-individual, non-profit, etc.) released to second and third parties (banks, agencies (such as the IRS), stockholders, general public, etc.) An accountant who wishes to make a personal financial statement of his wife for a bank loan still has to comply with GAAP, just as a major auditing firm has to comply with GAAP for GE's or Coca-Cola's financial statements, its just that different entities and situations require different set of rules and standards, but the combination of all these rules is considered GAAP.
GAAP is not a defined standard, it is a group of ideas for which everybody (there are exceptions) accepts as the rules for financial reporting. Examples include that everybody presents its assets and liabilities, followed by the income statement, followed by the statement of cash flows, and hence it is GAAP. Anyone who doesn't present it this way is presenting the information in non-GAAP form (certain exceptions apply.)
Second, GAAP for local and state governments do not operate under a different set of assumptions, since those accounting standards which the GASB establishes is still GAAP, just sub-categorized as Governmental-GAAP. And the GASB standards only address specific situations unique to government financial reporting, while GASB has clearly stated that any accounting principle which they do not address is subject to those established by other bodies (FASB, APB, etc.).
Third, the article should clearly distinguish the hierarchy and those regulatory bodies which merely influence GAAP. The SEC does not establish GAAP, therefore should not be atop of the Setting GAAP list, that would be for the FASB. Also, the House of GAAP segment should clearly state which statements of which agency has the more authoritative power (which would be the Statement of Financial Accounting Standards "SFAS" by FASB, except were GASB has said otherwise, but only for governments) followed by those with less authority.
Fourth, the article needs the history of GAAP, all the way back to the APB era and the formation of the recent standard setting bodies.
Fifth, the article should briefly describe the extent of each literature (ex. FASB SFAS sets the maximum authority of main financial reporting issues, while FASB interpretations provide understanding on more specific situations, etc.)
Sixth, there is no information on the basic financial statements or accompanying notes, the most important part of GAAP.
This is just my opinion, as an accountant and auditor, with experience in both private, non-profit, personal-individual, and governmental industries. Post what you think. Mtmelendez 14:29, 25 May 2006 (UTC)
replies: text: I think you need to expand/re-write the article since it seems you know what you are talking about. Renata 17:15, 25 May 2006 (UTC)
thread_title: It's all wrong... (cleanup)

message: * Rename - This is a name and should be in capitals. In addition, every country has its own GAAP, so to be consistent, I suggest we put the country name at the end with brackets (USA) or (United States). Cordially SirIsaacBrock 22:17, 8 April 2006 (UTC)
replies: text: I agree with SirIsaacBrock. Most countries have unique GAAP that mesh with their tax, legal, economic, and political system. Identifying Generally Accepted Accounting Principles as being from the US is a good idea. -Rangermike 01:47, 3 August 2006 (UTC)
thread_title: Rename

message: hai
i want some information how GAAP came in to existence in USA
: I think I just did it :)
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Could someone familiar with GAAP really explain the distinguishing characteristics of these style of coorperate account, in a way usefull for newbies. To me this would include:
explaining how the matching principle assumes everything is going to be orderly, and disordely events like a lawsuit creates a "charge" or "reserving" instead of just having the expense as it goes.
what "goodwill ammortization" means
:It doesn't mean anything any more, since they changed the rules with FASB 142, issued June 2001. Probably your confused about the definition of Goodwill --Fredrik Coulter 04:57, Mar 8, 2005 (UTC)
a list of the major accounting changes of the last 15 years
:I've started working on this for governmental GAAP. If you're interested, go to the Timeline of Governmental Accounting Standards - US. I'm expanding each of the Statements (one per day). I'll also be going back in time a little bit to the predecessor of the GASB. If I finish it, I may very well do the same thing for commercial GAAP, although I would be very happy if someone else did it first. (The FASB just issued Statement 153 in December 2004, so writing them up would be a major undertaking. It gets worse, since GAAP predates the FASB by decades, with earlier organizations also getting into the act.)--Fredrik Coulter 04:57, Mar 8, 2005 (UTC)
::As a follow up, if someone does want to write up all the FASB Statements, I suggest using the format I've been using the the GASB Statements, which can be gotten (with comments) by going to the edit page of User:Fcoulter/tempfile (Just a thought.) --Fredrik Coulter 05:00, Mar 8, 2005 (UTC)
The History section of the article should mention that until 2008, the GAAP hierarchy was defined in the auditing standards rather than in the accounting standards (by Statement on Auditing Standards [SAS) 69 of the AICPA). In May 2008, FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles", which moved the definition of the GAAP hierarchy into the accounting standards. (See http://www.fasb.org/news/nr050908fas162.shtml). Also, the article is wrong to say that the Public Company Accounting Oversight Board (PCAOB) is involved in setting accounting standards -- despite the appearance of the word "Accounting" in its name, the PCAOB actually regulates auditing standards and the practitioners of auditing for public companies (SEC registrants) in the US.
Final account of a sale trader Fëãr Bullet (talk) 22:07, 11 October 2018 (UTC)
thread_title: Other topics

message: Can someone good with accounting explain in more detail the various differnet principles of GAAP (ie. the whys? of the rules) besides whats already in the article. For example, the "matching rule" where revenues should be matched with expenses (I guess even though they may have occoured at different times), why do that? Is it to not mislead people into thinking that the company made all this money this quarter without spending much money (so as to give an accurate "snapshot" of the company)? Whats the purpose of recording certain types of assets using one kind of method but testing for "impairment"? From all the different things I have read in annual reports and stuff, it seems that one of the principles of the gaap accounting structure is that its designed not to just show the companies results and status in the absolute sense, but rather it is also structured in some ways to make clear to the investor that his money is being put to a GOOD use, in other words, not just sitting with the company. Am I making any sense? :).
The final thing, in the case of a mortgage servicing company which records its "mortgage servicing rights" as an asset I guess on the balance sheet: that number is like an estimate of the total value of those payments less guestimate prepays and defaults. If the facts that went into the guestimate changes the company has to change that asset number and record it to earnings (I think, I may be tottaly wrong). In this scenario, it seems to me like the company didn't "lose" money in the laymans sense, but rather sort of reversed out an income statement that it made previously. Now assuming I'm correct about all of this, if a company purchases an interest rate hedge of some kind to hedge this effect, is it spending real money to offset like a pure accounting scenario? If I'm off about what I have been saying, the article should still definately talk about the concept of "earnings smoothing" (which has been so much in the papers over the last 5 years) which to me seems to have a blurry line between legal and illegal versions.
:Matching is good because it "matches" related revenues and expenses. For example, it may take $100 to buy materials in the month of January. It may take $150 to get the labor to turn the raw materials into finished goods. When we sell the product for $500, we recognize the $250 expense because it shows what we had to spend to make that $500. If it was not for the matching principle, then the expenses and revenues would not be shown during the same period, which would not show investors how much money it took to produce a good or service.
:As far as recording as what value to record something at, we (at this time) record everything down at historical cost--or what we gave up to get the asset. Also, let's define an asset as a "future benefit." When we use the benefit, it is "expensed."
:As time goes, we use the asset, so the future benefits from the asset will decrease. We show the use of future benefits as depreciation. Depreciation shows on the financial statement how "much" we used of our assets. It also allows a company to spread out the cost of an asset over several periods, rather than expensing it over a single period (thanks to the matching principle).
:With certain types of assets, such as property, plant, and equipment, we test them annually for impairment. When we do this, we check to see if the asset is lower than fair value. For example, if the book value (historical cost less depreciation) is $500,000 and the fair value is $200,000, then we take a one-time impairment loss of $300,000.
:Financial statements are far from perfect. In a utopia, we could compare Coca-Cola and Pepsi's finanical statements and could compare them, line to line, but we can't. In a perfect world, everybody would understand all financial statements; but they are designed only for people who know enough about financial statements. Because of all of this, it's easy to understand why most of the country is financially illiterate.
:I'm not quite sure what you mean with a mortgage servicing company, mainly because I've never looked at their financial statements. But I can talk somewhat about the interest rate hedge. This is done all of the time by companies. It's not earnings management, it's the company taking a risk on interest rates going up or down to offset certain risks. Sometimes they win, sometimes they do not. Offhand, I'm not sure how they are shown on the statements, or if they are merely disclosed.
:"Earnings smoothing" or what I like to call "earnings management" is what would be like raising the bad debts expense or depreciation rates in a good year, creating a "cookie-jar reserve" so when a bad year comes by, it looks like nothing significant happened. The SEC looks for stuff like this. --Zoop 19:40, 6 August 2005 (UTC)
thread_title: Principles

message: I added an external link to a book that mathematically describes GAAP.
Please don't remove this link. Wikipedia users were clicking the
link; they were seeking this type of accounting information.
When the hits stopped coming, I noticed the link was undone.
Previously, the link was to the web page introducing the
book. However, this might be in violation of Wikipedia's
external link policy. So now the link goes directly to
the book, bypassing the introductory web page.
71.197.70.177 23:29, 31 March 2007 (UTC)
thread_title:  Added external link to accounting math book 

message: Previously, I added a link to my free accounting math book; however, that was in violation of the conflict of interest policy. So now I am proposing that someone else add the external link to the book. It mathemacically describes US GAAP, which is appropriate for this article. The URL to the book is *US GAAP Mathematically Described. Timhowardriley 16:44, 2 May 2007 (UTC)
thread_title:  Proposal to add link to accounting math book 

message: This might sound stupid, but shouldn't it be "generally-accepted" (rather than "generally accepted") ?
I'm not questioning whether everyone writes the hyphen or not (I realize nobody does), but it seems to me that if I were to write a text or something and refer to something that's "generally accepted" the way it is used in the name, I'd hyphenate it. For instance, if I had a baby that has brain damages, I'd write something like "brain-damaged baby", not "brain damaged baby". Or, maybe something more clear, a "ten-year-old" child (as opposed to "ten year old"). Generally-accepted here, as a whole, serves like an adjective (the way I understand it). Seigneur101 (talk) 22:31, 14 May 2009 (UTC)
thread_title:  Hyphen? 

message: The section in the GAAP main article for US is rather large. A smaller summary should appear there, instead its coverage should be mostly in this page.
70.49.126.190 (talk) 07:20, 14 October 2011 (UTC)
thread_title:  Merge from section in GAAP main article 

message: Someone who understands accountancy should explain how accounting principles are applied by the Trump companies in New York. Recent legal depositions reveal that neither the Chief Financial Officer nor Donald Trump Junior can explain what G.A.A.P. are. Donald Trump Senior is on record as stating that he values his properties according to how he feels at the time: in other words he applies neither the Historic Cost nor the Fair Market Value Principle. NRPanikker (talk) 23:01, 27 October 2023 (UTC)
thread_title:  Trump Organization