Question

When viewing the FASB Statement of Financial Accounting Concepts No. 8 and reviewing the Objective, Usefulness, and Limitations of General Purpose Financial Reporting. How does having a standard set of generally accepted accounting principles support these concepts?

Answer 1

Having a standard set of generally accepted accounting principles support the concepts of FASB.

Generally Accepted accounting principles provides set of rules for legalities, complexities and details of various prospects of accounting including business and corporate accounting. The Financial Accounting Standards Board (FASB) uses these accepted accounting principles as foundation for its comprehensive set of commonly adopted and best in class practices. The same is also used for accounting methods. the top 10 key concepts in GAAP guidelines are as follows:

• Principle of regularity
• Principle of consistency
• Principle of sincerity
• Principle of permanence of methods
• Principle of non-compensation
• Principle of prudence.
• Principle of continuity
• Principle of periodicity
• Principle of materiality
• Principle of utmost good faith

Adopting these generally accepted accounting principles helps in standardization across different sectors and industries. This promotes overall familiarity. one other most required benefit is transparency. In the modern era, this is perhaps the most essential requirement. when an entity adopts these principles, it makes its financial reporting transparent. All of these efforts works in alignment with the objective of wealth maximisation concept for all stakeholders of business. Additionally it helps all stakeholders to make sound business decisions.