Standards prevent companies from using different kinds of accounting methods and practices that might inflate their income or net worth. Having accounting standards in place ensures uniformity and fairness in financial reporting. Accounting standards help external users, such as creditors, investors, and regulators, make informed decisions about the company’s financial performance and financial health. GAAP sets the rules for financial reporting, making all financial statements of publicly traded companies in the US relevant, reliable, consistent, and comparable.
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