Q21Q. - Intermediate Accounting (Kieso)

Question

What are the sources of pressure that change and influence the development of GAAP?

Step-by-Step Solution

Answer

The sources of pressure that change and influence the development of GAAP include individual firms, governmental agencies, industry associations, accounting practitioners, academicians, professional accounting entities, and public opinion.

Step 1: Meaning of GAAP

Generally Accepted Accounting Principles, also referred to as GAAP, is a collection of practices and conventions used by firms for the preparation of financial statements and accounting reports. The standards are formulated by the Financial Accounting Standards Board (FASB). The motive of GAAP standards is to confirm that the financial information supplied to the regulators and investors is error-free, authentic, and compatible with one another.

Step 2: Sources of pressure that change and influence the development of GAAP

The business put pressure on the Financial Accounting Standard Board (FASB) to replace the existing rules with the newly developed ones. It also exerts pressure on Financial Accounting Standards Board (FASB) to change GAAP. Such organizations comprise Certified Public Accountants (CPAs) and accounting firms, the American Institute of Certified Public Accountants (AICPA), Academicians, Investing public, the financial community (bankers, analysts), compilers (Financial Executives Institute), industry associations, and Government (SEC, IRS, other agencies).