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accounting assignment

GAAP - GENERALLY ACCEPTED ACCOUNTING PRINCIPLES


Pakistan
What Does Generally Accepted Accounting Principles - GAAP Mean? The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. Investopedia explains Generally Accepted Accounting Principles - GAAP GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements. If a financial statement is not prepared using GAAP principles, be very wary! That said, keep in mind that GAAP is only a set of standards. There is plenty of room within GAAP for unscrupulous accountants to distort figures. So, even when a company uses GAAP, you still need to scrutinize its financial statements.

India
Introduction: Accounting Standards are used as one of the main compulsory regulatory mechanisms for preparation of general-purpose financial reports and subsequent audit of the same, in almost all countries of the world. Accounting standards are concerned with the system of measurement and disclosure rules for preparation and presentation of financials statements. They appear with a set of authoritative statements of how particular types of transactions, events and other costs should be recognized and reported in the financial statements. Accounting standards are devised to furnish useful information to different users of the financial statements, to such as shareholders, creditors, lenders, management, investors, suppliers, competitors, researchers, regulatory bodies and society at large and so on. In fact, such statements are designed and prescribed so as to improve & benchmark the quality of financial reporting. The rapid growth of international trade and internationalization of firms, the Developments of new communication technologies, the emergence of international competitive forces is perturbing the financial environment to a great extent. Under this global business scenario, the residents of the business community are in badly need of a common accounting language that should be spoken by all of them across the globe. A financial reporting system of global standard is a pre-requisite for attracting foreign as well as present and prospective investors at home alike that should be achieved through harmonization of accounting standards.

accounting assignment

Accounting Standards are the policy documents (authoritative statements of best accounting practice) issued by recognized expert accountancy bodies relating to various aspects of measurement, treatment and disclosure of accounting transactions and events. As relate to the codification of Generally Accepted Accounting Principles (GAAP). These are stated to be norms of accounting policies and practices by way of codes or guidelines to direct as to how the items, which go to make up the financial statements should be dealt with in accounts and presented in the annual accounts. The aim of setting standards is to bring about uniformity in financial reporting and to ensure consistency and comparability in the data published by enterprises. Objectives of the study The Paper is presented with the following objectives: 1. To understand the various Accounting standards that exit as of now, and the governing bodies of such accounting standards. 2. To understand the significance of harmonizing global accounting standards 3. To understand the issues in globalizing the accounting standards Accounting standards prevalent all across the world: * Accounting standards are being established both at national and international levels. But the variety of accounting standards and principles among the nations of the world has been a sustainable problem for globalizing the business environment. * There are several standard setting bodies and organizations that are now actively involved in the process of harmonization of accounting practices. The most remarkable phenomenon in the sphere of promoting global harmonization process in accounting is the emergence of international accounting standards. * The International Accounting Committee (IASC), now International Accounting Standards Board (IASB) was formed on 29th June 1973, by the recognized professional accounting bodies in Canada, Australia, France, Japan, Germany, Mexico, Netherlands, United Kingdom and the United States of America, with its secretariat and head quarters in London. * National standard setting bodies like Financial Accounting Standards Boards (FASB) of USA, Accounting Standards Boards (ASB) of UK, and Indian Accounting Standards (IAS) in India generally frame accounting standards in the line of IASC after due consideration of the local laws and conditions. * In India the Accounting Standards Board (ASB) was constituted by the Institute of Chartered Accountants of India (ICAI) on 21st April 1977 with the function of formulating accounting standards. Do we need to harmonize the accounting standards of different bodies? Different companies observe it from published annual accounts of various Indian companies that there are divergent accounting practices for the same transaction. This in effect is defeating the comparability of financial statements. The reasons for the different accounting practices may be: a) Too many alternative accounting treatments in the accounting standards; b) Lack of harmony among government, standards setting body, and regulatory agencies;

accounting assignment

* Adoption of different accounting standards causes difficulties in making relative evaluation of performance of companies. This phenomenon hinders the valuation and consequently the decision making process. * To overcome these problems, harmonization of accounting standards has already been started. Accounting harmonization is not an end by itself, but it is a means to an end. The ultimate objective of harmonizing accounting practices among countries is to foster international comparability of accounts. * But still the harmonization process has a long way to go. Many standard setting bodies and regulators of different nations are ardent protectors of their local standards, they are in no mood to allow their job being taken over by a foreign entity. * Thus winning the consent of these bodies is vital for international accounting standards to don the mantle of common accounting code, i.e. harmonization of common accounting standards, which will make implementing countries more competitive internationally. * Accounting standards vary from one country to another. There are various factors that are responsible for this. Some of the important factors are legal structure sources of corporate finance maturity of accounting profession degree of conformity of financial accounts government participation in accounting and Degree of exposure to international market.

* Diversity in accounting standards not only means additional cost of financial reporting but can cause difficulties to multinational groups in the manner in which they undertake transactions. It is quite possible for a transaction to give rise to a profit under the accounting standards of one country where as it may require a deferral under the standards of another. - When a multinational company (MNC) has to report under the standards of both the countries it might lead to some extremely odd results. For instance, Daimler Benz, who was the first German to secure stock market listing in the United States, reported a net profit of DM 158 m for the six months to June 1998 based on German GAAP. The U.S GAAP reconciliation statement revealed that the company had incurred a loss of DM. 949m. - Similarly, British Telecom Inc. reported a net profit of 1767 for the year ended 31-3-1994 under the UK GAAP but under the US GAAP reconciliation- the net profit reduced to 1476. - Although there are different solutions that have been suggested to resolve the problems associated with filling financial statements across national boundaries like reciprocity and reconciliation, but they not free from limitations. International accounting standards serves the purpose of reducing diversity in accounting practices but invites qualitative differences of financial accounting and reporting systems. * Again these qualitative differences may be removed if a single set of internationally accepted standards can be used for all cross-border listed financial statements. These differences may be reduced if the recognized professional accounting bodies of the world arrange a happy marriage between the national and international accounting standards. - Issues in adopting global accounting standards: -There seems to be a reluctance to adopt the International Accounting Standards Committee (IASC) norms in the US? This is definitely a problem. The US is the largest market and it is important for IASC standards to be harmonized with those prevailing there. The US lobby is strong, and they

accounting assignment

have formed the G4 nations, with the UK, Canada, and Australia (with New Zealand) as the other members. IASC merely enjoys observer status in the meetings of the G4, and cannot vote. Even when the standards are only slightly different, the US accounting body treats them as a big difference, the idea being to show that their standards are the best. We have to work towards bringing about greater acceptance of the IASC standards. - How real is the threat from G4? G4 has evolved as a standard setting body and has recently issued its first standard on pooling of interest method. (Mergers can either be in the nature of purchase or in the form of pooling of interest like HLL-BBLIL). It is also expected to publish new or revised papers on reporting financial performance, business combinations, joint ventures, leases, and contributions. So far, the FASB (the US standard setting body) was the world's standard setter because of mandatory compliance with US GAAP for listing on the New York Stock Exchange (NYSE). The US congress had to, however, step in and overrule the FASB standard on stock option. The current status of IAS (Indian Accounting Standards): In India, the Statements on Accounting Standards are issued by the Institute Of Chartered Accountants of India (ICAI) to establish standards that have to be complied with to ensure that financial statements are prepared in accordance with generally accepted accounting standards in India (India GAAP ). From 1973 to 2000 the IASC has issued 32 accounting standards. These standards, as a matter of fact, most of the countries in the world, which are interested, and confidence in adopting these standards may be followed. But it is observed that many countries are not adopting the standards in the presentation of accounting information. With a view to examine the time gap for indianisation of International Accounting Standards, the information is analyzed and presented in Annexure - I. The table shows that the average gap for indianisation of International Accounting Standards is 6.13 years. It shows that for adopting IAS in India, it is taking 6.13 years for one accounting standard. This analysis points out the poor research work, and development in the accounting field. A significant criticism of IAS; * That the standards are too broad based and general to ensure that similar accounting method is applied in similar circumstances. For Instance, the accounting for expenses incurred under a Voluntary Retirement Scheme ( VRS ) , in which the methods used range from pay-as-you-go to Amortization of the present value of future pension payments over the period of benefit. * It may be noted that in several important areas, when the Indian Standards are implemented, the accounting treatment in these areas could lead to differences in the restatement of accounts in accordance with US GAAP . Some of these areas are: Consolidated financial statements Accounting for taxes on income Financial Instruments Intangible Assets

* Restatement to US GAAP : A restatement of financial statements prepared under India GAAP to U.S. GAAP requires careful planning in the following areas:

accounting assignment

- Involvement of personnel within the accounts function and the time frame within which the task is to be completed. - Identification of significant accounting policies that would need to be disclosed under U.S. GAAP and the differences that exist between India GAAP and U.S. GAAP - The extent of training required within the organisation to create an awareness of the requirements under U.S. GAAP - Subsidiaries and associate companies and restatement of their accounts in conformity with U.S. GAAP - Adjustment entries that are required for conversion of India GAAP accounts. - Reconciliation of differences arising on restatement to U.S. GAAP in respect of income for the periods under review and for the statement of Shareholder's equity. * The timetable for restatement of the financial statements to US GAAP would depend upon the size of the company and the nature of its operations , the number of subsidiaries and associates . The process of conversion would normally take up to 16 weeks in a large company in the initial year . It is thus necessary to streamline the accounting systems to provide for restatement to U.S. GAAP on a continuing basis. At first sight the restatement of financial statements in accordance with U.S. GAAP appears to be formidable. However, as the Indian accounting standards are built on the foundation of international accounting standards, on which a truly global GAAP might be built, there is no cause for concern . Another reason for the prevailing divergent accounting practices is the Accounting Standards, the provisions of the Income Tax Act 1961 and Indian Companies Act 1956 do not go together. (a) Company law and Accounting Standards: In India, though accounting standards setting is presently being done by ICAI, one could discern a tentative and halfhearted foray by company legislation in to the making of accounting rules of Measurement and reporting. This action by itself is not the sore point but the failure to keep pace with the changes and simultaneously not allowing scope for some one else to do it is disturbing. A study of the requirement of company law regarding the financial statements reveal several lacunae like earning per share, information about future cash flows, consolidation, mergers, acquisitions etc. (b) Income Tax Act and Accounting Standards: The Income Tax Act does not recognize the accounting standards for most of the items while computing income under the head "Profits & Gains of Business or Profession". Section 145(2) of the I.T. Act has empowered the Central Government to prescribe accounting standards. The standards prescribed so far constitute a rehash of the related accounting standards prescribed by ICAI for corporate accounting. On a close scrutiny of these standards one is left wondering about the purpose and value of this effort. Examples are application of prudence substance over form, adherence to principles of going concern etc. (c) Other regulations and accounting standards:

accounting assignment

In respect of banks, financial institutions, and finance companies the Reserve Bank of India (RBI) pronounces policies among others, revenue recognition, provisioning and assets classifications. Similarly the Foreign Exchange Dealers Association (FEDAI) provides guidelines regarding accounting for foreign exchange transactions. Since the Securities & Exchange Board of India (SEBI) is an important regulatory body it would also like to have its own accounting standards and in fact, it has started the process by notifying cash flow reporting format. It is also in the process of issuing a standard on the accounting policies for mutual funds. It appears as if several authorities in our country are keen to have a say in the matter of framing accounting rules of measurement and reporting. The tentative and half hearted legal and regulatory intervention in accounting in our country, has come in the way of development of robust, continuously evolving and dynamic accounting theory and standards. Conclusion: India is slowly entering the arena of accounting standards. But the progress of formulation of accounting standards has been very slow compared with the developments at international levels. Bringing about harmonization in accounting practices among countries throughout the world is indeed a very formidable task. The vision of a harmonized accounting world may inspire many minds but in the practical field it is hard to go about embracing a situation where accounting principles and procedures are perfectly harmonized among countries through out the world. The development of harmonized accounting rules and a uniformity of approach among countries towards education and training of professional accountants should accompany principles. Further more, the harmonization of accounting rules and principles among countries should also be accompanied by inter country harmonization in auditing principles and standards. Harmonization initiatives are now working much more effectively than ever before. Many of the initial hurdles have been overcome and much progress towards harmonizing accounting principles and procedures among countries has already been achieved. Differences are still there but they are narrowing. It is expected that the pace of progress in the sphere of harmonization will accelerate further in the coming years. ANNEXURE-I List of Indian accounting standards adopted from IASC with time gap in years S. no. of Indian Year of Indian Corresponding IAS Year of issue of IAS Accounting Accounting Standards (International (International Standards Accounting Standards) Accounting Standards) 1 2 3 4 5 1976 1981 1981 1982 1982 1 2 7 10 8 1975 1975 1977 1978 1978 Time Gap (in years) 4 6 4 4 4

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6 7 8 9 10 11 12 13 14 15 1982 1983 1985 1985 1985 1989 1991 1995 1995 1995 4 11 9 18 16 21 20 25 22 19 1976 1979 1978 1982 1982 1983 1983 1986 1983 1983

accounting assignment
6 4 7 3 3 6 8 9 12 12

Canada GAAP - Generally Accepted Accounting Rules


The Generally Accepted Accounting Principles, or GAAP for short, are a set of accounting rules used to standardize the reporting of financial statements in the United States. Understanding GAAP can help you make better investing decisions. Manufacturing Earnings with a Waive of the Pen This morning, I was reading through the annual report of UPS, one of the largest and most profitable firms in the world, when something caught my attention. It seemed like a perfect opportunity to teach the readers of this site how small changes in accounting can substantially increase (or decrease) net income without changing a companys economic reality. Looking Beyond the Financial Statements Accounting and financial statements are the language of business. Still, as Charlie Munger points out, you need to look beyond the accounting and financial statements and into the underlying opportunities and risks a business faces.
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Looking Past the Numbers - The Limitation of the Debt to Equ You've probably heard portfolio managers say, "look beyond the accounting numbers and instead focus on economic reality." This article illustrates how one of the most popular financial metrics, the debt-to-equity ratio, can sometimes make an investment appear much riskier than it actually is. Revenue Recognition Revenue recognition can drastically affect the financial statements. This article explains the difference between revenue recognition methods and the practical implications for the average investor. Revenue recognition methods covered include sales basis, percentage of completion, completed contract, installment and cost recoverability.

accounting assignment

Adjusting Pension Assumptions to Manipulating Earnings By adjusting pension assumptions, management can manipulate earnings and overstate profit on the income statement. This article discusses how the investor can spot suspicious pension adjustments. Chartered Accountants of Canada This body sets the GAAP rules and regulation for Canada. Comprehensive United States GAAP Resources A site dedicated to GAAP in the United States. Offers information on APB's opinions, and Generally Accepted Accounting Principles books. Financial Accounting Standards Board The FASB is the body that establishes the standards for GAAP in the United States. The official homepage is a valuable resource for anyone researching a specific accounting concept.

USA
Generally Accepted Accounting Principles (GAAP) is the standard framework of guidelines for financial accounting. It includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. Contents 1 Overview 1.1 Principle of regularity 1.2 Principle of sincerity 1.3 Principle of the permanence of methods 1.4 Principle of non-compensation 1.5 Principle of prudence 1.6 Principle of continuity 1.7 Principle of periodicity 2 United States' GAAP Hierarchy 3 National GAAP 4 Required Departures from GAAP 5 International GAAP 6 See also 7 External links

Overview Financial accounting information must be assembled and reported objectively. Thirdparties who must rely on such information have a right to be assured that the data are free from bias and inconsistency, whether deliberate or not. For this reason, financial accounting relies on certain standards or guides that are called "General Accepted Accounting Principles" (GAAP). Principles also derive from tradition, such as the concept of matching. In any report of financial statements (audit, compilation, review, etc.), the preparer/auditor/CPA must indicate to the reader whether or not the information contained within the statements complies with GAAP.

accounting assignment

Principle of regularity Regularity can be defined as conformity to enforced rules and laws. This principle is also known as Principle of Consistency. Principle of sincerity According to this principle, the accounting unit should reflect in good faith the reality of the company's financial status.. Principle of the permanence of methods This principle aims at allowing the coherence and comparison of the financial information published by the company. Principle of non-compensation One should show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense, etc. Principle of prudence This principle aims at showing the reality "as is" : one should not try to make things look prettier than they are. Typically, a revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable. Principle of continuity When stating financial information, one should assume that the business will not be interrupted. This principle is mitigating the previous one about prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value (see depreciation). Principle of periodicity Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or lease, etc.), the given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction. United States' GAAP Hierarchy In the United States, GAAP derives, in order of importance, from: 1. issuances from an authoritative body designated by the American Institute of Certified Public Accountants(AICPA) Council (for example, the Financial Accounting Standards Board Statements, AICPA Accounting Principles Board Options, and AICPA Accounting Research Bulletins); 2. other AICPA issuances such as AICPA Industry Guides;

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accounting assignment

3. industry practice; and 4. into para-accounting literature in the form of books and articles. House of GAAP Category (a)(Most authoritative) FASB Standards and Interpretations Accounting Principles Board (APB) Opinions AICPA Accounting Research Bulletins (ARBs) Category (b) FASB Technical Bulletins AICPA Industry Audit and Accounting Guides AICPA Statements of Position (SOPs) Category (c) FASB Emerging Issues Task Force (EITF) AICPA AcSEC Practice Bulletins Category (d)(Least authoritative) AICPA Accounting Interpretations FASB Implementation Guides (Q and A) Widely recognized and prevalent industry practices Category A and B are considered authoritative. Category C and D are considered marginally authoritative, thoughts on interesting and unique issues, but could be invalid given a large level of materialism. Category C and D are considered a talking and reasoning phase of bringing issues to an authoritatize level of GAAP. National GAAP Every country has its own version of GAAP with standards set by a national governing body. Required Departures from GAAP Under the AICPA's Code of Professional Ethics under Rule 203 - Accounting Principles, a member must depart from GAAP if following it would lead to a material misstatement on the financial statements, or otherwise be misleading. In the departure the member must disclose, if practicable, the reasons why compliance with the accounting principle would result in a misleading financial statement. Under Rule 203-1-Departures from Established Accounting Principles, the departures are rare, and usually take place when there is new legislation, the evolution of new forms of business transactions, an unusual degree of materiality, or the existence of conflicting industry practices. This is taken from the Page 56 in the auditing textbook "Auditing, an integrated approach" by Alvin Arens and James Loebbecke, published in 1980 by Prentise Hall, ISBN 0-13-051656-2.

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accounting assignment

USE
Job Description:
Banks hire accountants to manage the numerous books of accounts they maintain for reporting purposes. Bank operations are complex as it often involves inter-company accounts, third-party liabilities and even offshore remittances. The banking industry is also a highly-regulated industry and Dubais banks are subject to special laws such as those pertaining to Islamic banking.

Duties:
Finance Operations. Accountants oversee the day to day financial operations of the bank conduct cash counts and look into daily teller reports, prepare checks for local and regional clearing, etc. Financial Reporting. Accountants maintain and update books of accounts, prepare reconciliations, analyses and reports for internal and external reporting requirements, especially as it relates to intercompany accounts and home office reporting requirements, as well as tax reports. Management Reporting. Accountants work as teams to report on the performance of multiple entities, consolidations and other complex financial reporting requirements, especially required and looked into by independent auditors and top management. Support functions. Accountants work closely with internal audit team in evaluation of internal control systems, especially in the selection of IT services providers and testing of systems.

Qualifications:
Education A Bachelors degree in Accounting is a must. A professional license as an accountant issued by any regulatory body is a plus. Although not a standard requirement, continuing education units pertaining to international business, correspondence banking and/or tax laws are excellent qualifications Technical Skills Experience with specialized accounting software is a given; excellent MS Excel skills is a must. Familiarity with banking laws and the banking and financial services industry is an advantage. Proficiency with generally-accepted accounting principles (GAAP) and proficiency with various financial analysis techniques is also important. Other Requirements Experience specific to the banking and financial services industries are not necessary although would definitely be an attractive item on the resume. Excellent

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accounting assignment

communication skills is a must as accountants work with colleagues and clients both within and outside the UAE.

Salary Range:
AED 5,000-25,000, depending on position level, organization size and related qualifications.

Employers Description:
Various companies in the banking and financial services industries hire qualified professional accountants, with or without experience. As Dubai has become the financial center of the Middle East and Africa, many multinational firms with global presence are located here. In fact, accountants are among the most sought-after professionals in the Dubai job market

Iran
Chapter 1 introduces you to accounting as a profession, and as it is used to make financial and business decisions. Billions of dollars exchange hands every day, in millions of separate business transactions. These are recorded and reported on using a comprehensive set of guidelines, referred to as Generally Accepted Accounting Principles (GAAP). Accounting - n. The bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business.1 System - n. A group of interacting, interrelated, or interdependent elements forming a complex whole.1 Accounting System - the people, procedures, and resources used to gather, record, classify, summarize and report the financial information of a business, government or other financial entity. Double-entry bookkeeping - the practice of recording a business transaction in two equal parts, called debit and credit entries. Debit refers to the left column and credit refers to the right column, in an accounting journal. Each transaction describes both: (1) the object of the transaction - such as rent, telephone, or payroll expense; sales, fee or interest revenue. (2) the source of payment - cash or credit. Money eventually changes hands in (almost**) all transactions, either at the time of the transaction, or perhaps at a future date in the case of items purchased on credit. Sometimes a transaction involves cash directly, at the time of the event, such as a cash sale at a grocery store. It is more common, and safer, to use a checking account for routine purchases. These are all considered

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part of the Cash account. Many, and perhaps most, transactions in a business take place on a credit basis. Businesses usually purchase their supplies and merchandise on a 30-day account, known as a trade account, or Accounts Payable. Sales are typically made in a similar fashion, called Accounts Receivable. **Adjusting and closing entries are not typical, and represent special entries made by accountants to prepare financial statements, and reset certain accounts at the end of a fiscal year.

accounting assignment

Marble tablet: Account of Disbursements of the Athenian State c. 418-415 BC An Accounting history page at TAMU

A Brief History of Accounting Accounting was born before writing or numbers existed, some 10,000 years ago, in the area known as Mesopotamia, later Persia, and today the countries of Iran and Iraq. This area contains the Tigris Euphrates river valley, a large fertile area 10,000 years ago with a large thriving population and active trading between towns and cities up and down the two rivers. Writing and numbers would be not be invented for about another 5,000 years. And what happens next will directly lead to the invention of both writing and number systems. At that time, merchants faced many of the same problems businesses face today. They had to ship their merchandise up and down the rivers, and that meant trusting a boatman with their goods. Unfortunately, not all boatmen were honest, and disagreements often arose about how much was shipped versus what was received at the other end. It is hard for us today to imagine a world without writing and numbers. Try to imagine yourself in their position.... what would you do? To deal with the problem, merchants came up with an ingenious plan. They made small clay tokens, in various shapes and with various markings, to indicate different products. One would mean a basket of grain, another would mean a pot of oil, etc. They had over 200 such tokens to indicate a large variety of common goods, including food, leather, clothing, utensils, tools, jewelry, etc.