Question

What parts of Generally Accepted Accounting Principles, are not generally accepted?

Answer 1

We know GAAPs provides base for the preparation of financial statements and most of the companies follow guidelines of GAAPs while preparing its’ financial statements. Thus GAAPs are the composition of principles, rules & regulations which are very helpful in preparation of financial statements.

But some parts of these GAAPs are very controversial, so some countries and their companies go against these parts of GAAPs. Parts which are not generally accepted are as follows;

1. Recording of assets on cost basis is not generally accepted because fair value of assets is very relevant hence some countries and companies want to disclose assets on fair value.

2. Treatment of off-balance sheet items also not generally accepted by all.

3. Disclosure as per GAAPs is not as much transperent as much should be hence some argue that disclosure as per GAAPs is not appropiate hence it is not generally accepted by all.

4. Revenue recognisition as per GAAPs have several ambigous rules hence all do not accept recognisition process of revenue as per GAAPs.

5. Problem in recording of liability is also controversial hence at the point of recording potential liabilities there are different views. So we can say that this part is also not generally accepted.