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Chapter 1: Question 20Q (page 24)

What are the primary advantages of having a codification of generally accepted accounting principles?

Short Answer

Expert verified

The primary advantage of having a codification is to assist users in enhancing and making them aware of whatGenerally Accepted Accounting Principles (GAAP) is. With the help of these, the firms can, from time to time, perform research relating to accounting problems or issues.

Step by step solution

01

Definition of Codification

Codification is the process of assembling all generally accepted accounting principles in one place. It merges all existing GAAP and creates a new level of generally accepted accounting principles (GAAP) which is acceptable by the law.

The objective of codification is to create accounting standards.

02

Primary advantages of having a codification of generally accepted accounting principles

  • Firstly, it will assist the users in providing a better understanding of what generally accepted accounting principles is.
  • Secondly, if there takes place, then companies will be in accordance with the generally accepted accounting principles, which in turn will reduce their time in addressing the accounting issues.
  • Thirdly, with the help of an online-based format, generally accepted accounting principles can be easily updated, which also assists users in staying updated.

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Most popular questions from this chapter

CA1-7 WRITING (Need for GAAP) Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it considered important. In addition, if an investor wants additional information, the investor could contact the company and pay to receive the additional information desired.InstructionsComment on the appropriateness of this viewpoint.

What organizations are the two key international players in the development of international accounting standards? Explain their role.

The expectations gap is:

  1. What financial information management provides and what users want.
  2. What the public thinks accountants do and what accountants think they can do.
  3. What the governmental agencies want form standard-setting and what the standard-setters provide.
  4. What the users of financial statements want from the government and what is provided.

Question: What was the Committee on Accounting Procedure, and what were its accomplishments and failings?

(GAAP and Standard-Setting) Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false.

  1. The objective of financial statements emphasizes a stewardship approach for reporting financial information.
  2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners’ or stockholders’ equity.
  3. Because they are generally shorter, FASB interpretations are subject to less due process compared to FASB standards.
  4. The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.
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