Question

Presented below are four statements which you are to identify as true or false.

1. GAAP is the term used to indicate the whole body of FASB authoritative literature.
2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements.
3. The primary governmental body that has influence over the FASB is the SEC.
4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard.

Answer 1

1. GAAP is the term used to indicate the whole body of FASB authoritative literature. TRUE.

The Financial Accounting Standards Board are the authors of the GAAP and as such GAAP is used to indicate the whole body of their literature.

2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements. FALSE.

To claim compliance with GAAP, all standards and interpretations including Disclosure requirements should be followed.

3. The primary governmental body that has influence over the FASB is the SEC. TRUE.

The Securities and Exchange Commission (SEC) is the Government body that is meant to oversee the application of Accounting standards and as such, they have influence over the FASB.

4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard. FALSE.

Even though they have a Government mandate, the FASB must follow due process when establishing principles so that people might be able to contribute to or criticize the guidelines should they please.