The Development of GAAP in the United States Free Essays

Setting GAAP These organizations influence the development of GAAP in the United States. United States Securities and Exchange Commission (SEC) The SEC was created as a result of the Great Depression. At that time there was no structure setting accounting standards. We will write a custom essay sample on The Development of GAAP in the United States or any similar topic only for you Order Now The SEC encouraged the establishment of private standard-setting bodies through the AICPA and later the FASB, believing that the private sector had the proper knowledge, resources, and talents. The SEC works closely with various private organizations setting GAAP, but does not set GAAP itself. American Institute of Certified Public Accountants (AICPA) In 1939, urged by the SEC, the AICPA appointed the Committee on Accounting Procedure (CAP). During the years 1939 to 1959 CAP issued 51 Accounting Research Bulletins that dealt with a variety of timely accounting problems. However, this problem-by-problem approach failed to develop the much needed structured body of accounting principles. Thus, in 1959, the AICPA created the Accounting Principles Board (APB), whose mission it was to develop an overall conceptual framework. It issued 31 opinions and was dissolved in 1973 for lack of productivity and failure to act promptly. After the creation of the FASB, the AICPA established the Accounting Standards Executive Committee (AcSEC). It publishes: Audit and Accounting Guidelines, which summarizes the accounting practices of specific industries (e. g. casinos, colleges, airlines, etc. ) and provides specific guidance on matters not addressed by FASB or GASB. Statements of Position, which provides guidance on financial reporting topics until the FASB or GASB sets standards on the issue. Practice Bulletins, which indicate the AcSEC’s views on narrow financial reporting issues not considered by the FASB or the GASB. Financial Accounting Standards Board (FASB) Realizing the need to reform the APB, leaders in the accounting profession appointed a Study Group on the Establishment of Accounting Principles (commonly known as the Wheat Committee for its chair Francis Wheat). This group determined that the APB must be dissolved and a new standard-setting structure be created. This structure is composed of three organizations: the Financial Accounting Foundation (FAF, it selects members of the FASB, funds and oversees their activities), the Financial Accounting Standards Advisory Council (FASAC), and the major operating organization in this structure the Financial Accounting Standards Board (FASB). FASB has 4 major types of publications: Statements of Financial Accounting Standards – the most authoritative GAAP setting publications. More than 150 have been issued to date. Statements of Financial Accounting Concepts – first issued in 1978. They are part of the FASB’s conceptual framework project and set forth fundamental objectives and concepts that the FASB use in developing future standards. However, they are not a part of GAAP. There have been 7 concepts published to date. Interpretations – modify or extend existing standards. There have been around 50 interpretations published to date. Technical Bulletins – guidelines on applying standards, interpretations, and opinions. Usually solves some very specific accounting issue that will not have a significant, lasting effect. In 1984 the FASB created the Emerging Issues Task Force (EITF) which deals with new and unusual financial transactions that have the potential to become common (e. g. accounting for Internet based companies). It acts more like a problem filter for the FASB – the EITF deals with short-term, quickly resolvable issues, leaving long-term, more pervasive problems for the FASB. Governmental Accounting Standards Board (GASB) How to cite The Development of GAAP in the United States, Essay examples