Question 20Q - Intermediate Accounting (Kieso)

Question

What are the primary advantages of having a codification of generally accepted accounting principles?

Step-by-Step Solution

Answer

The primary advantage of having a codification is to assist users in enhancing and making them aware of what Generally Accepted Accounting Principles (GAAP) is. With the help of these, the firms can, from time to time, perform research relating to accounting problems or issues.

Definition of Codification

Codification is the process of assembling all generally accepted accounting principles in one place. It merges all existing GAAP and creates a new level of generally accepted accounting principles (GAAP) which is acceptable by the law.

The objective of codification is to create accounting standards.

Primary advantages of having a codification of generally accepted accounting principles

• Firstly, it will assist the users in providing a better understanding of what generally accepted accounting principles is.
• Secondly, if there takes place, then companies will be in accordance with the generally accepted accounting principles, which in turn will reduce their time in addressing the accounting issues.
• Thirdly, with the help of an online-based format, generally accepted accounting principles can be easily updated, which also assists users in staying updated.