Accounting Theory
When and Why Were GAAP First Established?
The APB listed 31 separate opinions during its existence from 1962 to 1973. The board was created by the American Institute of Certified Public Accountants (AICPA), and was replaced by Financial Accounting Standards Board (FASB) in 1973. Its mission was to develop an overall conceptual framework of U.S. generally accepted accounting principles (U.S. GAAP). The American Institute of Certified Public Accountants issued Accounting Interpretations between 1968 and November 1973, when the Financial Accounting Standards Board took over the issuing of interpretations in June 1974. The Interpretations were not considered pronouncements from the Accounting Principles Board, but Richard C. Lytle, the administrative director of the Accounting Principles Board, was responsible for their preparation.The FASB and IASB planned meetings in 2015 to discuss “business combinations, the disclosure framework, insurance contracts and the conceptual framework.” As of 2017, there were no active bilateral FASB/IASB projects underway. Instead, the FASB participates in the Accounting Standards Advisory Forum, a global grouping of standard-setters, and monitors individual projects to seek comparability. An APB opinion is an authoritative pronouncement issued by the Accounting Principles Board. The official opinions were given on various accounting issues that required clarification or interpretation.Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants compile their financial statements.
Who Enforces GAAP?
The APB itself was a successor organization to the Committee on Accounting Procedure, which was considered ineffective. However, due to its lack of resources, the APB also could not keep pace with the changes and growth of the types of transactional activity in corporate America that required financial reporting. The FASB and the IASB issued guidance on recognizing revenue in contracts with customers in 2014, establishing principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from these transactions. In May 2015 the SEC acknowledged that “investors, auditors, regulators and standard-setters” in the United States did not support mandating International Financial Reporting Standards Foundation (IFRS) for all U.S. public companies. There was “little support for the SEC to provide an option allowing U.S. companies to prepare their financial statements under IFRS.” However, there was support for a single set of globally accepted accounting standards.
Gauging the Impact of Combining GAAP and IFRS
APB was the main organization setting the US GAAP and its opinions are still an important part of it. All of the Opinions have been superseded in 2009 by FASB’s Accounting Standards Codification. Between 1959 and 1973, the Accounting Principles Board (APB) was charged with creating accounting standards and issuing pronouncements related to accounting theory and practice.
List of Accounting Principles Board Opinions
The standards are established and administered by the American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Standards Board (FASB). The Accounting Principles Board (APB) was the former authoritative body of the American Institute of Certified Public Accountants (AICPA) formed in 1959. It was replaced in 1973 by the Financial Accounting Standards Board (FASB).For Interpretations see section 9551 of the final edition of the APB Accounting Principles, Volume 2, Original Pronouncements as of June 30, 1973. The interpretation numbers come from the Financial Accounting Board’s Original Pronouncements as amended 2008/2009 Edition, volume 3. GAAP is not the international accounting standard; this is a developing challenge as businesses become more globalized.
Why did the aicpa create the Accounting Principles Board?
An APB opinion is an authoritative pronouncement issued by the Accounting Principles Board. The official opinions were given on various accounting issues that required clarification or interpretation. The APB listed 31 separate opinions during its existence from 1962 to 1973.The purpose of the APB was to issue guidelines and rules on accounting principles. Some of the opinions released by the APB still stand as part of the Generally Accepted Accounting Principles (GAAP), but most have been either amended or entirely superseded by FASB statements. The Financial Accounting Standards Board (FASB) is a private, non-profit organization standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public’s interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the US.
- Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB).
- Public companies in the United States must follow GAAP when their accountants compile their financial statements.
- GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information.
GAAP (generally accepted accounting principles)
Federal endorsement of GAAP began with legislation like the Securities Act of 1933and the Securities Exchange Act of 1934, laws enforced by the U.S. Today, the Financial Accounting Standards Board (FASB), an independent authority, continually monitors and updates GAAP. Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices. Of the APB’s 31 opinions and four statements several were instrumental in improving the theory and practice of significant areas of accounting.The International Financial Reporting Standards(IFRS) is the most common set of principles outside the United States and is used in places such as the European Union, Australia, Canada, Japan, India, and Singapore. To reduce tension between these two major systems, the FASB and International Accounting Standards Board are working to converge standards. According to Stephen Zeff in The CPA Journal, GAAP terminology was first used in 1936 by the American Institute of Accountants (AIA).Many have been superseded by FASB pronouncements; 19 opinions still stand as part of GAAP. After the Accounting Principles Board was replaced by the Financial Accounting Standards Board (FASB), the APB opinions were also superseded by GAAP.GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information. GAAP principles, which are updated regularly to reflect the latest accounting methodologies, are the definitive source of accounting guidelines that companies rely on when preparing their financial statements.Membership ranged from 18 to 21 representatives from major accounting firms, industry, and academia. The APB served an important role, as it was the first organized body to lay the foundation for GAAP that is so integral to the integrity of financial statements today.
What pronouncements are issued by the Accounting Principles Board?
The Accounting Principles Board (APB) was a group that issued authoritative pronouncements about accounting theory and the practical application of accounting. The APB was organized and overseen by the American Institute of Public Accountants, and operated from 1959 to 1973.
The APB was disbanded in the hopes that the smaller, fully independent FASB could more effectively create accounting standards. The APB and the related Securities Exchange Commission (SEC) were unable to operate completely independently of the U.S. government. The Statement of Financial Accounting Concepts is issued by the Financial Accounting Standards Board (FASB) and covers financial reporting concepts. Due to the changes in accounting practices, a number of modifications and additions were also done to accounting theory.
APB Opinion
The Financial Accounting Standards Board helps to regulate and revise accounting theories. Certified Professional Accountants (CPAs) also help corporate businesses adjust to these modifications and new standards. The Financial Accounting Standards Board is an autonomous organization that oversees the preparation of financial statements by both private and public enterprises.
AccountingTools
The FASB replaced the American Institute of Certified Public Accountants’ (AICPA) Accounting Principles Board (APB) on July 1, 1973. Accounting Principles Board Opinions, Interpretations and Recommendations were published by the Accounting Principles Board from 1962 to 1973. The board was created by American Institute of Certified Public Accountants (AICPA) in 1959 and was replaced by Financial Accounting Standards Board (FASB) in 1973. Its mission was to develop an overall conceptual framework of US generally accepted accounting principles (US GAAP).