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Financial Accounting Standards


The Generally Accepted Accounting Principles (GAAP) are the ruling accounting principles, standards and procedures that regulate financial accounting. These are rules that have come from an authoritative accounting rule-making body or that over time a given practice has become accepted as appropriate because of universal application.

Today the authoritative literature for GAAP is encompassed in the Financial Accounting Standards Board Accounting Standards Codification (or the Codification). All other literature not included in the Codification is non-authoritative. In case a subject is not covered by the Codification other accounting literature should be considers, such as the writing of the FASB, APB, CAP, IFRS or other professional literature. the Codification is linked here.

The Codification is organized in a hierarchical structure of Topic-Subtopic-Section-Paragraph, so that ASC 310-10-05-6 breaks down like this

Topic ASC 310 Receivables
Subtopic ASC 310-10 Overall
Section ASC 310-10-05 Overview and Background
Paragraph ASC 310-10-05-6 Factoring Arrangements

An outline of the major topics in the Codification:

  • 100s General Principles
  • 200s Presentation
  • 300s Assets
  • 400s Liabilities
  • 500s Equity
  • 600s Revenue
  • 700s Expenses
  • 800s Broad Transactions
  • 900s Industry

Securities and Exchange Commission

The Securities and Exchange Commission (SEC) is an agency of the United States Government. It was created with the Securities Exchange Act of 1934, and is charged with enforcing that act as well as: Securities Act 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes-Oxley Act of 2002, and other statures.

In addition to enforcement the SEC has the responsibility to develop accounting standards. The SEC encouraged the creation of private standard setting bodies because it believed that the private sector had the needed talent and resources to achieve this task (see CAP, APB, FASB). Mostly the SEC has let the private sector be the formulator and implementer of standards, but reserving the right to encourage and overrule.

Financial Accounting Standards Board

The Financial Account Standards Board (FASB) came into existence in 1973 after recommendations in the Wheat Committee findings; it replaced the APB and CAP of the AICPA. Also created in ’73 were the Financial Accounting Foundation (FAF) to provide oversight and funding for FASB and Financial Accounting Standards Advisory Committee (FASAC) to provide expertise on various projects.

Historical Accounting Rules Bodies

American Institute of Certified Public Accountants

American Institute of Certified Public Accountants (AICPA) is the oldest authoritative source of GAAP in the United States going back to its origin in 1887 as well as its contributions through CAP and APB. Today it no longer is a source of authoritative accounting guidance for public companies.

Committee on Accounting Procedure

The Committee on Accounting Procedure (CAP) was the first private sector organization that set accounting standards in the United States. It was assembled in 1939 by the American Institute of Accountants (todays AICPA), at urging of the SEC. From 1939 to 1959 it published 51 Accounting Research Bulletins

Accounting Principles Board

The Accounting Principles Board (APB) was formed by the AICPA in 1959 to replace CAP. Between 1959 and 1973 it issued 31 opinions and developed a conceptual framework for financial accounting.

The Accounting Research Bulletins have all been superseded by the Accounting Standards Codification (ASC) and their titles are listed here for historical reference.

No Accounting Research Bulletin
1 General Introduction and Rules Formerly Adopted
2 Unamortized Discount and Redemption Premium on Bonds Refunded
3 Quasi-Reorganization or Corporate Readjustment—Amplification of Institute Rule No. 2 of 1934
4 Foreign Operations and Foreign Exchange
5 Depreciation on Appreciation
6 Comparative Statements
7 Reports of Committee on Terminology
8 Combined Statement of Income and Earned Surplus
9 Report of Committee on Terminology
10 Real and Personal Property Taxes
11 Corporate Accounting for Ordinary Stock Dividends
12 Report of Committee on Terminology
13 Accounting for Special Reserves Arising Out of the War
14 Accounting for United States Treasury Tax Notes
15 Renegotiation of War Contracts
16 Report of Committee on Terminology
17 Post-War Refund of Excess-Profits Tax
18 Unamortized Discount and Redemption Premium on Bonds Refunded (Supplement)
19 Accounting under Cost-Plus-Fixed-Fee Contracts
20 Report of Committee on Terminology
21 Renegotiation of War Contracts (Supplement)
22 Report of Committee on Terminology
23 Accounting for Income Taxes
24 Accounting for Intangible Assets
25 Accounting for Terminated War Contracts
26 Accounting for the Use of Special War Reserves
27 Emergency Facilities
28 Accounting Treatment of General Purpose Contingency Reserves
29 Inventory Pricing
30 Current Assets and Current Liabilities; Working Capital
31 Inventory Reserves
32 Income and Earned Surplus
33 Depreciation and High Costs
34 Recommendation of Committee on Terminology; Use of Term "Reserve"
35 Presentation of Income and Earned Surplus
36 Pension Plans; Accounting for Annuity Costs Based on Past Services
37 Accounting for Compensation in the Form of Stock Options
38 Disclosure of Long-Term Leases in Financial Statements of Lessees
39 Recommendation of Subcommittee on Terminology; Discontinuance of the Use of the Term "Surplus"
40 Business Combinations
41 Presentation of Income and Earned Surplus
42 Emergency Facilities—Depreciation, Amortization, and Income Taxes
43 Restatement and Revision of Accounting Research Bulletins
44 Declining-Balance Depreciation
45 Long-term Construction-type Contracts
46 Discontinuance of Dating Earned Surplus
47 Accounting for costs of Pension Plans
48 Business Combinations
49 Earnings per Share
50 Contingencies
51 Consolidated Financial Statements

The APB Opinions have been superseded by the Accounting Standards Codification (ASC) and their titles are listed here for historical reference.

No Accounting Principles Board Opinions
1 New Depreciation Guidelines and Rules
2 Accounting for the "Investment Credit"
3 The Statement of Source and Application of Funds
4 Accounting for the "Investment Credit"
5 Reporting of Leases in Financial Statements of Lessee
6 Status of Accounting Research Bulletins
7 Accounting for Leases in Financial Statements of Lessors
8 Accounting for the Cost of Pension Plans
9 Reporting the Results of Operations
10 Omnibus Opinion-1966
11 Accounting for Income Taxes
12 Omnibus Opinion—1967
13 Amending Para. 6 of APB Opinion No. 9, Application to Commercial Banks
14 Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants
15 Earnings per Share
16 Business Combinations
17 Intangible Assets
18 The Equity Method of Accounting for Investments in Common Stock
19 Reporting Changes in Financial Position
20 Accounting Changes
21 Interest on Receivables and Payables
22 Disclosure of Accounting Policies
23 Accounting for Income Taxes-Special Areas
24 Accounting for Income Taxes—Investments in Common Stock Accounted for by the Equity Method
25 Accounting for Stock Issued to Employees
26 Early Extinguishment of Debt
27 Accounting for Lease Transactions by Manufacturer or Dealer Lessors
28 Interim Financial Reporting
29 Accounting for Non-monetary Transactions
30 Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions
31 Disclosure of Lease Commitments by Lessees