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The board is private and non-governmental, but works for the public’s best interest. The main authority is the Financial Accounting Standards Board (FASB), who releases regular statements, keeps meticulous archives, and offers helpful resources for businesses and accountants looking to adapt to GAAP. Instead, a few independent boards and organizations are responsible for developing, distributing, and continuously updating the accounting principles.
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While the federal government requires public companies to comply with the set of principles, they don’t create or maintain it. Good question! It’s not who you might think. As a result, investors and banks have a much easier, more reliable way of assessing the health of a company and extracting the information they need. When accounting methods are standardized across industries, financial reports are much easier to analyze within a single business or to compare between businesses. The Generally Applied Accounting Principles are a set of 10 standards, meant to maintain a certain consistency across companies’ financial statements. This article will explain what each principle means, who develops and regulates them, and how to comply. If you’re doing business in the US, or you’re hoping for investments or loans from American sources, then you should absolutely follow these standards. The 10 principles are like the medical world’s edict, “First, do no harm” - but for accounting: a combination of ethics, legal expectations, and proven best practices. Actually there’s not a lot of accounting or finance jargon either! GAAP is written in everyday language, with clear concepts that outline the idea of integrity in accounting. The principles aren’t hard-and-fast laws written in difficult legal jargon.