Question

If you were given complete authority in the matter, how would you propose that GAAP should be developed and enforced?

Short answer

• The method must be well organized, prompt, and accessible.
• The method must be unbiased.
• The method must instruct overall guidance in the absence of legislative authority.
• The method must create sound besides practicalaccounting standards.

Step-by-step solution

Meaning of Generally Accepted Accounting Principles (GAAP)

Generally Accepted Accounting Principles (GAAP) comprises a collection of both broad guidelines and relatively detailed practices and procedures that accountants and accounting companies must adhere to while preparing financial statements.

Development and enforcement of GAAP

The changes that can be brought about in the current GAAP are as follows:

• The rules should enclose all the loopholes prevailing in the current GAAP.
• The principles should be made simpler and easily understandable for all its users.
• The principles should be advanced in such a manner that it boosts the understanding of the principles.
• The gap and differences in overseas accounting should be minimized.