#Matching principle concept how to#

The conceptual framework sets the basis for accounting standards set by rule-making bodies that govern how the financial statements are prepared.

#Matching principle concept how to#

Guidance may be given on how to report transactions, measurement requirements, and application on financial statements, among other things. These concepts can help ensure information is comparable and reliable to stakeholders. The FASB uses a conceptual framework, which is a set of concepts that guide financial reporting. The basics of accounting discussed in this chapter are the same under either set of guidelines. The SEC regulates the financial reporting of companies selling their shares in the United States, whether US GAAP or IFRS are used. Some companies that operate on a global scale may be able to report their financial statements using IFRS. The SEC not only enforces the accounting rules but also delegates the process of setting standards for US GAAP to the FASB.

As a result, financial statement users are more informed when making decisions. By having proper accounting standards such as US GAAP or IFRS, information presented publicly is considered comparable and reliable. The SEC is an independent federal agency that is charged with protecting the interests of investors, regulating stock markets, and ensuring companies adhere to GAAP requirements. Publicly traded companies (those that offer their shares for sale on exchanges in the United States) have the reporting of their financial operations regulated by the Securities and Exchange Commission (S.E.C.). International accounting rules are called International Financial Reporting Standards (I.F.R.S.). If US accounting rules are followed, the accounting rules are called US GAAP. GAAP are the concepts, standards, and rules that guide the preparation and presentation of financial statements. The Financial Accounting Standards Board (F.A.S.B.) is an independent, nonprofit organization that sets the standards for financial accounting and reporting, including generally accepted accounting principles (G.A.A.P.), for both public- and private-sector businesses in the United States. 1.7 Accounting Principles, Concepts and Assumptions