| While many businesses assume that
| |
| | But it must choose which cost of good
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| accountants are bound by generally
| |
| | sold expense method to use and which
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| accepted accounting practices and that
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| | depreciation expense method to use.
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| these are inviolate, nothing could be
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| | For other expenses and for sales revenue,
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| further from the truth. Everything is
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| | one general accounting method has been
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| subject to interpretation, and GAAP is no
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| | established; there are no alternative
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| different. For one thing, GAAP themselves
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| | methods. However, a business has a fair
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| permit alternative accounting methods to
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| | amount of latitude in actually
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| be used for certain expenses and for
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| | implementing the methods. One business
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| revenue in certain specialized types of
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| | applies the accounting methods in a
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| businesses. For another, GAAP methods
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| | conservative manner, and another business
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| require that decisions be made about the
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| | applies the methods in a more liberal
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| timing for recording revenue and
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| | manner. The end result is more diversity
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| expenses, or they require that key
| |
| | between businesses in their profit
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| factors be quantified. Deciding on the
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| | measure and financial statements than one
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| timing of revenue and expenses and
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| | might expect, considering that GAAP have
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| putting definite values on these factors
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| | been evolving since 1930.
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| require judgments, estimates and
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| | The pronouncement on GAAP prepared by the
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| interpretations.
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| | Financial Accounting Standards Board
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| The mission of GAAP over the years has
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| | (FASB) is now more than 1000 pages long.
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| been to standardize accounting methods in
| |
| | And that doesn't even include the rules
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| order to bring about uniformity across
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| | and regulations issued by the federal
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| all businesses. But alternative methods
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| | regulatory agency that jurisdiction over
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| are still permitted for certain basic
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| | the financial reporting and accounting
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| business expenses. No tests are required
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| | methods of publicly owned businesses -
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| to determine whether one method is more
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| | the Securities and Exchange Commission
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| preferable than another. A business is
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| | (SEC).
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| free to select whichever method it wants.
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| | Matthew Meyer.
|
