Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 1: Question 3MCQ (page 21)

GAAP is comprised of:

  1. FASB standards, interpretations, and concepts statements.
  2. FASB financial standards.
  3. FASB standards, interpretations, EITF consensuses, and accounting rules issued by FASB predecessor organizations.
  4. any accounting guidance included in the FASB Codification.

Short Answer

Expert verified

The correct option is (d) any accounting guidance included in the FASB Codification.

Step by step solution

01

Meaning of GAAP

GAAP, also known as generally accepted accounting principles, is defined as a set issued by theFinancial Accounting Standards Board (FASB), which comprises principles, standards, and procedures.

Its objective is to provide accuracy, regularity, and uniformity of the communication of financial information.

02

Explanation for the correct option

The FASB Accounting Standards Codification is the only origin of authoritative generally accepted accounting principles (GAAP) identified by the FASB to be applied to nongovernmental organizations.

The accounting literature excluded in the codification is regarded as non-authoritative. Since GAAP is used by FASB in the form of its practice, hence, GAAP comprises any accounting guidance included in the FASB Codification.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

GROUPWORK (GAAP Terminology) Wayne Rogers, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the IRS.” As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms.

Instructions

Presented below is a list of common accounting acronyms. Identify the term for which each acronym stands, and provide a brief definition of each term.

(a) AICPA (e) FAF (l) FASB

(b) CAP (f) FASAC (j) SEC

(c) EITF (g) GAAP (k) IASB

(d) APB (h) CPA

(Accounting Numbers and the Environment) Hardly a day goes by without an article appearing on the continu fallout from the financial crisis of 2008. An overheated real estate market, fueled by home purchase incentives, poor lend practices, and securitization through high-risk, mortgage-backed securities, led to a near collapse of global capital markets. a consequence, many have argued that if the financial institutions had been required to report their loans (and loan-bac: investments) at fair value instead of cost, large losses would have been reported earlier. This would have signaled regulator the problems in the mortgage markets and therefore minimized the losses to U.S. taxpayers.

Instructions

Explain how reported accounting numbers might affect an individual's perceptions and actions. Cite two examples.

The major key players on the international side are the:

(a) IASB and FASB. (c) SEC and FASB.

(b) IOSCO and the SEC. (d) IASB and IOSCO.

(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.

(FASB Role in Rule-making) A press release announcing the appointment of the trustees of the new Financial Accounting Foundation stated that the Financial Accounting Standards Board (to be appointed by the trustees)”…will become the established authority for setting accounting principles under which corporations report to the shareholders and others” (AICPA news release July 20,1972).

Instructions

  1. Identify the sponsoring organization of the FASB and the process by which the FASB arrives at a decision and issues an accounting standard.
  2. Indicate the major types of pronouncements issued by the FASB and the purpose of each of these pronouncements.
See all solutions

Recommended explanations on Business Studies Textbooks

Human Resources

Read Explanation

Business Operations

Read Explanation

Corporate Finance

Read Explanation

Organizational Behavior

Read Explanation

Introduction to Business

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free