The American accounting profession spoil their structured approach to GAAP by announcing there are three, perhaps four accounting assumptions [1] which accountants must understand before applying their Generally Accepted Accounting Principles. The first American assumption states that a business is separate from its owners. Under IFRS, this American assumption is considered so obvious it is…
It is interesting that the one most important accounting rule (or principle) not included in the US accounting principles or GAAP is what IFRS call the ‘accrual basis of accounting’. Paragraph 27 of IAS 1, Presentation of Financial Statements states clearly: “An entity shall prepare its financial statements, except for cash flow information, using the…
In spite of not using the same word ‘principle’, eight of the ten American accounting principles exist as part of the rules to be followed in International Financial Reporting Standards, IFRS. For instance, one of the ten GAAPs is the Principle of Permanence of Methods. Procedures used to prepare financial reports must be consistent under…
In the USA, accountants have ten clear accounting principles they call GAAP: Generally Accepted Accounting Principles. [1] In the UK and elsewhere, principles mean something else. In the UK for instance the Financial Reporting Council, the FRC, who set UK standards for accounting have invented ‘pervasive principles’ [2] completely different to American principles. These are…