Final answer:
The Financial Accounting Standards Board (FASB) is the organization with legal authority to create Generally Accepted Accounting Principles (GAAP) in the U.S., designated by the Securities and Exchange Commission (SEC).
Step-by-step explanation:
In the United States, the Financial Accounting Standards Board (FASB) has the legal authority to establish Generally Accepted Accounting Principles (GAAP). The FASB is an independent non-profit organization that operates to create standards that govern the preparation of corporate financial reports and ensure that these reports are transparent, comparable, and consistent.
GAAP is a collection of commonly followed accounting rules and standards for financial reporting. The Securities and Exchange Commission (SEC) designates the FASB to establish these principles for public and private companies as well as non-profit organizations. The SEC itself has the authority to establish accounting principles and standards but typically looks to private sector bodies like the FASB to develop these detailed rules.
Understanding GAAP is essential for individuals in the field of accounting and finance, as adherence to these standards is mandatory for companies to accurately report their financial information.