Full transcript
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0:05the United States generally accepted
0:07accounting principles also known as US
0:10GAAP are the foundation of financial
0:12accounting for business entities in the
0:14United States when we refer to GAAP we
0:17are referring to all those accounting
0:19principles standards and procedures that
0:21govern the preparation of financial
0:23statements the Financial Accounting
0:25Standards Board FASB is the organization
0:28that develops establishes and
0:30communicates these standards of
0:32financial accounting and reporting in
0:34the United States while faz B develops
0:37standard the Securities and Exchange
0:39Commission SEC actually regulates
0:42financial reporting and disclosures by
0:44public companies in the United States
0:47all publicly traded entities are
0:49required to submit their audited
0:51financial statements to the SEC
0:53quarterly and annually the SEC also
0:56monitors the Public Company Accounting
0:58Oversight Board PCAOB which is an entity
1:02created by Congress as a component of
1:04the sarbanes-oxley Act of 2002 the PCAOB
1:09oversees the audits of public companies
1:11to protect the interests of investors
1:14these organizations work in unison to
1:17ensure the financial information is
1:19faithfully represented the notion of
1:22faithful representation rests on seven
1:25key concepts of US GAAP concept number
1:29one the business entity concept also
1:32known as the economic entity assumption
1:34this concept defines a sort of
1:37accounting border around the business to
1:39ensure the financial information for
1:41transactions made by the business is
1:43reported separately from transactions of
1:45the owners of the business or any other
1:47affiliated business entity concept
1:50number two is the cost principle under
1:53the cost principle all business
1:55transactions must initially be recorded
1:57at historical cost this principle
2:00effectively implements a conservative
2:03approach to the financial statements if
2:05for example the value of an asset on the
2:07balance sheet increases over time the
2:10company's still required to carry that
2:12at cost on the balance sheet concept
2:15number three is the objectivity concept
2:18the objectivity concept states that all
2:21accounting records should be free of
2:22bias in other words financial
2:25information should not be misleading but
2:27objective and verifiable concept number
2:31four is the monetary unit concept the
2:34monetary unit concept states that all
2:36transactions must be expressed as a
2:38currency such as the US dollar concept
2:41number five is the revenue recognition
2:43principle the revenue recognition
2:46principle determines when revenue is
2:48recorded this is particularly important
2:51because the timing of revenue
2:52recognition has a direct impact on a
2:54company's bottom line concept number six
2:57is the accounting period concept the
3:00accounting period concept provides that
3:02transaction should be recorded in the
3:04period in which they occurred concept
3:07number seven is the matching principle
3:09the matching principle is an effort to
3:11ensure that expenses are recognized at
3:14the same pace as the revenue that those
3:16expenses help generate
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