Accounting standards are the rules and procedures that guide the accounting and financial operations of entities in the preparation of their financial reporting. What exactly are these standards and who oversees and enforces them? Follow along for the answers.

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GAAP

As touched on above, the accounting standards are essentially the widely agreed upon set of standards for how accounting should be done in the U.S. In different countries across the world, these standards can often be very different, while some countries go on to actually share in a common set of mutual standards in accounting method. In the United States, the primary accounting standards are listed under GAAP, or Generally Accepted Accounting Principles. By law, GAAP must be followed by all organizations releasing accounting information to anyone outside of that organization itself and any organization listed on a stock exchange.

FASB

So, who controls and enforces GAAP adherence in the U.S.? The FASB, or Financial Accounting Standards Board is the primary overseer of GAAP matters today. Surprisingly to some, however, the FASB is not actually a government agency but a private institution that creates and oversees the greater world of accounting and financial reporting methods in the U.S. If there are any violations of GAAP, the FASB possesses a number of responses at its disposable including reporting to the government’s Security and Exchange Commission, notifying those affected across the industry, and other forms of advocacy for correction and justice until resolution.

The 10 Accounting Standards

The 10 common accounting standards established by GAAP and overseen by the FASB are as follows:

  1. Business Singularity – Businesses are considered their own entities, separate from their owners or creators, able to carry on without them, on their own, into the future.
  2. Specific Currency – All accounting involving finances must be done in the form of the U.S. dollar, even if foreign currency figures must be first converted in order to conform to this rule.
  3. Specific Time Period – All accounting statements, balance sheets, and so on must pertain to a specified and clearly labeled time period.
  4. Historical Cost – For general reporting/accounting purposes, historic (original) values must be used. Current, evolving valuations involving inflation and other valuation changes are to be demonstrated in other, specialized means.
  5. Full Disclosure – All companies must provide all facts and figures in their financial accounting. Nothing is to be intentionally omitted in said accounting.
  6. Full recognition – Companies that, for some reason, are providing their accounting information to another entity, must do so in that same time period being reported on whenever possible.
  7. The Non-Death Principle – All businesses are inherently assumed, in accounting matters, to be eternally functional and living until officially declared or stated otherwise.
  8. The Matching Principle – Accrual methods in accounting should always be used, and for every debit transaction, there should be a credit transaction and vice versa.
  9. Materiality – Accountants must use their best judgement in all situations, even those in which minimal facts and figures make a clear conclusion difficult.
  10. Conservative Accounting – While individual strategies vary from business to business, all are highly advised to record expenses immediately and to record incomes when they are actually received.

These common accounting standards provide an important set of standards for the accounting of most businesses in the U.S. These ultimately play a very pivotal role in maintaining a unified and fair system across the board. In conclusion, for those interested in learning more about the world of accounting standards, the Financial Accounting Standards Board is the top authority with which to inquire on this very subject.