Generally Accepted Accounting Principles (GAAP).

Generally Accepted Accounting Principles (GAAP).

Two laws, the Securities Act of 1933 and the Securities Exchange Act of 1934, give the SEC authority to establish reporting and disclosure requirements. However, the SEC usually operates in an oversight capacity, allowing the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) to establish these requirements. The GASB develops accounting standards for state and local governments.The various rules and pronouncements come from the FASB which is a non-profit organization that the accounting profession has created to announce the rules of GAAP reporting and to amend the rules of GAAP reporting as occasion requires. The FASB Accounting Standards Codification® is the source of authoritative GAAP recognized by the FASB to be applied to nongovernmental entities. The Codification reorganizes the thousands of US GAAP pronouncements into roughly 90 accounting topics. It is effective for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. In order to give answers to a large amount of different questions, some of which were mentioned above, financial reporting is supposed to provide information that satisfies certain basic objectives. In particular, such information should be useful and helpful to present to potential investors and creditors and other users in making rational financial decisions, in improving the performance of the business, and in maintaining records. To achieve the basic objectives GAAP rest upon some underlying assumptions and principles. Assumptions:* Economic entity assumption. Financial records must be separately maintained for each economic entity i.e. the business is separate from other businesses. In addition, business records must be kept separate from the personal assets or liabilities of the owners.