Its Origins and Importance
In revisiting the history of American trade and commerce, one could come across information about laws enacted in order to avoid, if not prevent, the recurrence of financial frauds. The founding of the Securities and Exchange Commission, for one, stems from the enactment of the Securities and Exchange Act. The SEC was established as the federal government’s arm for setting straight the rules that governed stock trading in the capital market.
The implementation of generally accepted accounting principles (GAAP) became necessary,in line with the SEC’s goal to set a uniform standard for financial statements preparations. It came into focus that most stock investors relied heavily on financial reports for their investment decisions.
However, prior to GAAP’s implementation, accounting procedures were merely adopted as norms. Back then, they were modified in ways that could make the financial condition of a company appear enticing to investors.
The first step to understanding the generally accepted accounting principles is to have a clearer perception of its origins and importance. This guide gives readers further information through the following articles: