Gaap Governmental Accounting Standards
Accountants work in both private industry and government organizations. Private industry accountants follow generally accepted accounting principles, or GAAP. Government accountants follow government accounting standards. Both GAAP and governmental accounting standards provide financial reporting guidance to accountants. These guidelines vary depending on the needs of the users.
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Purpose
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GAAP standards provide consistency in financial reporting for all companies that follow them. This allows all financial statement users to understand the assumptions behind the numbers. This understanding allows financial statement users to compare the results of various companies. Governmental accounting standards provide the framework for financial reporting by governmental agencies. These standards keep government agency financial communication understandable and transparent for the public.
Users
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The users of GAAP include accountants, investors and management. The accountants use GAAP to record financial transactions and guide their financial statement preparation. Management uses these principles interpret the financial results and how they relate to the company's performance. Investors use these principles to determine if the company's financial statements communicate profitable business decisions. The users of governmental accounting standards include the accountants who prepare the financial statements, as well as the legislators, taxpayer groups and community organizations. Legislators use these standards to review the results of their own actions. Taxpayer groups and community organizations use these standards to evaluate the performance of the government agency.
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Values
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The accounting profession embraces specific values regarding reported financial information. These values include independence, integrity and objectivity for both governmental accountants and private accountants. Independence refers to the concept of reporting financial results without bias and free of any conflicts of interest. For instance, the accountant should receive no benefit for reporting positive vs. negative numbers. Integrity refers to doing the right thing. Objectivity involves reporting numbers that can be measured and verified. Private accountants also value confidentiality and keep financial details private. Governmental accountants value transparency and openly share information with the public.
Standards
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Both GAAP and governmental accounting standards aim to provide useful information for the users of the financial statements. Both sets of standards undergo scrutiny by the public prior to deciding on the final wording of each standard. As situations arise that affect the financial situation of the business or government environment, the proper recording of these situations are considered and standards are issued.
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