GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Accounting Principles Board served as the deliberative body for the American Institute of Certified Public Accountants (AICPA), a professional association for those in the accounting industry. This board offered opinions and statements on generally accepted accounting principles (GAAP) in the United States from 1959 to 1973. These standards are used by accountants with federal agencies and corporations. The AICPA replaced the Accounting Principles Board with the Financial Accounting Standards Board (FASB) in 1973 to increase responsiveness to accounting issues.

The historical reputation of the AICPA provided legitimacy to the Accounting Principles Board during its brief life. The AICPA was created in 1887 as the leading industry organization for accountants working in the U.S. This institute set ethical, educational and professional standards for accountants at a time when corporations were expanding worldwide. The first board within the AICPA was the Committee on Accounting Procedure, which existed from 1936 to 1959. The board built on the committee’s work in preventing corrupt accounting principles that contributed to the 1929 stock market crash.

The U.S. Securities and Exchange Commission (SEC) relied on the Accounting Principles Board to establish accounting standards. The SEC is authorized under the Securities Exchange Act of 1934 to set standards for bookkeeping by publicly traded companies. SEC officials have worked with AICPA since 1934 to use the organization’s accounting knowledge for the public good. This public-private partnership allows the SEC to consult with leading accountants on ways to keep accurate accounting ledgers. Most of the opinions by the Accounting Principles Board and FASB have been incorporated into federal policies on public accounting.

The board issued 35 opinions and statements during its 14-year existence. Corporations and government agencies still use 19 board opinions as part of GAAP. A December 1967 decision by the board created criteria for reporting asset depreciation and deferred compensation. In August 1970, the board generated principles for reporting the transfer of assets as part of business combinations and mergers. The board’s decision in October 1972 set standards for corporate reporting of stocks used as payment for employees.

The AICPA replaced the Accounting Principles Board with FASB in 1973 because of criticisms of the previous board. The Accounting Principles Board was seen by critics as insufficiently independent from the federal government and corporations. The design of the FASB is informed largely by the failings of its past boards. The FASB requires its members to resign from corporate boards and sell off business interests during their five-year terms. These requirements allow FASB members to create accounting standards independent of personal and financial interests.

Generally accepted accounting principles (GAAP) are the guidelines, rules, and procedures used in recording and reporting accounting information in audited financial statements. Various organizations have influenced the development of modern-day accounting principles. Among these are the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), and the Securities and Exchange Commission (SEC). The first two are private sector organizations; the SEC is a federal government agency.

The AICPA played a major role in the development of accounting standards. In 1937 the AICPA created the Committee on Accounting Procedures (CAP), which issued a series of Accounting Research Bulletins (ARB) with the purpose of standardizing accounting practices. This committee was replaced by the Accounting Principles Board (APB) in 1959. The APB maintained the ARB series, but it also began to publish a new set of pronouncements, referred to as Opinions of the Accounting Principles Board. In mid-1973, an independent private board called the Financial Accounting Standards Board (FASB) replaced the APB and assumed responsibility for the issuance of financial accounting standards. The FASB remains the primary determiner of financial accounting standards in the United States. Comprised of seven members who serve full-time and receive compensation for their service, the FASB identifies financial accounting issues, conducts research related to these issues, and is charged with resolving the issues. A super-majority vote (i.e., at least five to two) is required before an addition or change to the Statements of Financial Accounting Standards is issued.

The Financial Accounting Foundation is the parent organization to FASB. The foundation is governed by a 16-member Board of Trustees appointed from the memberships of eight organizations: AICPA, Financial Executives Institute, Institute of Management Accountants, Financial Analysts Federation, American Accounting Association, Securities Industry Association, Government Finance Officers Association, and National Association of State Auditors. A Financial Accounting Standards Advisory Council (approximately 30 members) advises the FASB. In addition, an Emerging Issues Task Force (EITF) was established in 1984 to provide timely guidance to the FASB on new accounting issues.

The Securities and Exchange Commission, an agency of the federal government, has the legal authority to prescribe accounting principles and reporting practices for all companies issuing publicly traded securities. The SEC has seldom used this authority, however, although it has intervened or expressed its views on accounting issues from time to time. U.S. law requires that companies subject to the jurisdiction of the SEC make reports to the SEC giving detailed information about their operations. The SEC has broad powers to require public disclosure in a fair and accurate manner in financial statements and to protect investors. The SEC establishes accounting principles with respect to the information contained within reports it requires of registered companies. These reports include: Form S-X, a registration statement; Form 1O-K, an annual report; Form 1O-Q, a quarterly report of operations; Form S-K, a report used to describe significant events that may affect the company; and Proxy Statements, which are used when management requests the right to vote through proxies for shareholders.

iXBRL reporting - how it impacts your business

There are following impacts indicate by Practice Eye company:
1 Basic principles
iXBRL is purely concerned with the introduction of computer-readable XBRL tags into business reports to enable automated handling of financial data. It should not otherwise change the nature and content of company business reports. That continues to be determined by individual companies in the light  of accounting principles, company law etc.
Those who read business reports in iXBRL need not be aware of the existence of XBRL tags. They may see some changes in the way the user interface of such software works, but the creation of the XBRL tags will be hidden.
 2 Small companies with simple accounts who do not use accounting software
 HMRC provides its own free Corporation Tax online filing software - a downloadable form based product - that can be used by most small companies with relatively straightforward financial affairs to file their Company Tax Returns online. It includes specially formatted accounts and computations templates which if used will ensure data is submitted in the right format.
HMRC and Companies House also provide an optional joint filing service that enables small companies to enter their accounts data once, using the template provided in HMRC's software, which can then be used to submit full accounts over the Internet to HMRC as part of the Company Tax Return and also to send these - or an abbreviated version - to Companies House.
 If a company’s financial reports contain data not catered for in the template provided, then the company won’t be able to use it. However if the company’s circumstances are such that it can legitimately use the CT600 (short) it may be able to attach accounts and computations produced by commercial software.
Companies will need to register to use the HMRC Corporation Tax Online Service to submit their returns online whatever software they choose to use. An activation code will be posted out that can take up to seven days to arrive so companies are advised to register early.
 3 Companies using final accounts production and tax preparation software
 Companies should talk to their commercial software provider or supplier to make sure that the product offered meets their needs and allows them to deliver a fully compliant Company Tax Return.
 HMRC publishes a list of software companies who have successfully tested their products with them and provided evidence that they have either developed software or manage a service (or both) that can produce one or more elements of a Company Tax Return. Inclusion in the list does not imply any judgment by HMRC on the general quality of the software; it  simply indicates that the software meets certain basic criteria including producing technically valid iXBRL output.
 Companies and accountants should consider what processes to follow if accounts and tax computations are produced at different times, possibly by different individuals or firms. Since both accounts and computations must eventually be filed in iXBRL, it may be sensible to ensure accounts and computations are produced in iXBRL when first completed, rather than trying to convert them at a later date. However, it is up to companies and accountants to determine what processes to follow in the light of their circumstances. As discussed below, it is the responsibility of companies to ensure they comply with statutory filing requirements.
 4 Companies creating accounts or computations through manual processes
 Large companies, among others, may create their accounts and other reports using Excel, Word or similar text-based software. These companies may elect to integrate final accounts preparation software into their systems and processes. Alternatively they have two options for converting their data into iXBRL format:
 Use conversion software to turn data from Excel or similar programs into iXBRL. This will involve some manual effort in identifying and applying the correct tags. The degree of effort and nature of the task will vary depending on the software chosen. A number of conversion products are available.
 Some conversion software is listed as ‘recognized’ on the HMRC website and company accountants or others may be able to offer advice on the merits of suitable software. Software may allow templates to be created which will enable tagging to be reused for subsequent reports, so that conversion, once done for an initial report, becomes straightforward in the future. In some cases, it may be possible to use the same template across a range of subsidiaries within a group. The basic issues involved in tagging financial reports and producing iXBRL are described in the next chapter.
 Outsource the conversion of reports into iXBRL to an external organization. These take accounts prepared in a traditional manner, covert them to iXBRL and add the tags.
 5 Company responsibilities for iXBRL filing
 It is a company’s responsibility to ensure that it adequately complies with requirements for filing in iXBRL. Companies which are using final accounts production or tax preparation software to file in iXBRL should ensure that their software is adequate to handle the type and scope of data in their reports. They may wish to consult their software providers or accountants on this point. Companies using external managed tagging services to produce iXBRL formatted accounts and/or computations are responsible for ensuring that it can be incorporated with the online CT600 return form for submission. Companies using conversion software to turn their accounts and computations data into iXBRL in-house are responsible for ensuring these comply with HMRC online filing requirements. They may wish to consult their accountants or auditors on their processes.
 HMRC accepts that that during the transition to iXBRL some errors and omissions may occur with tagging and HMRC are keen to help companies get it right rather than penalize them. Where companies have made a reasonable attempt to get it right, HMRC will adopt a sympathetic approach for the first two years and will be focusing on providing help and support to correct the errors, rather than rejecting the return.

Ledger maintenance

The integration of information from a variety of sources into a program’s financial reporting system is essential to providing accurate and timely results.  Freedom Services utilizes a sophisticated general ledger system that is both flexible and capable of accepting data from a number of different mediums.

Practice Eye can:

• Prepare accounts to help in completion of self-assessment tax returns;
• Produce financial statements to file at Companies Registration Office and abbreviated accounts to ensure the minimum amount of your financial information is made public.

Accounts are prepared to agreed timescales and deadlines. But we can do more than just report the history of what’s already happened…

• Identify areas where we can assist in minimizing your tax liability;
• Identify areas of the business that give you the most opportunity to make improvements;
• Use the accounts to help you measure where you are in meeting your goals and what actions you need to take.

We take the time to explain your accounts to you so that you understand what is going on financially within your business, helping you to plan for the future. Please contact us if you need further advice, have any questions about our services, would like a free consultation or a fixed fee quote.