Essay on Generally Accepted Principles ( Gaap )

2333 Words Sep 28th, 2016 10 Pages
Generally Accepted Principles (GAAP) must be adhered to when a company distributes its financial statements outside of the company. If a corporation 's stock is publicly traded, the financial statements must also adhere to rules established by the U.S. Securities and Exchange Commission (SEC). This includes having its financial statements audited by an independent CPA firm. GAAP are a common set of standards and procedures for reporting financial information. Any domestic company whose equity and debt securities are traded on U.S. public markets are required to file regular ongoing financial reports with the Securities and Exchange Commission (SEC) or state regulatory agency that follow GAAP called a 10-K, 10-Q or 8-K. The form 10-K is an annual report that provides a comprehensive view of the company’s business and financial condition including audited financial statements. Form 10-Q provides unaudited financial information quarterly, and form 8-K is used to report major events that the shareholders should know about. According to the Financial Accounting Foundation, financial reporting (balance sheets, profit and loss statements, financial notes, and disclosures) is the language used to communicate information about the financial condition of a company (GAAP and Public Companies). Today, the need for relevant, comparable, and high-quality financial reporting is greater than ever because the global economy is active and often irregular.
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