What do GAAP, FASB, IASB and IFRS mean?
Below is what the acronyms mean (these terms are further defined in the glossary on pages 326-27):
GAAP - Generally Accepted Accounting Principles; there are US, UK, International and other country versions.
FASB - Financial Accounting Standards Board (US). IASB - International Accounting Standards Board. IFRS - International Financial Reporting Standards.
US GAAP is in some respects more extensive than IFRS and also the United States tends to lean towards more rules-based or legalistic standards. There is a process of convergence with IFRS, but this is not complete.
UK GAAP pre-dates IFRS and again is fairly extensive but, apart from accounting for smaller entities, from 2015 the United Kingdom will adopt an Anglicized version of the IFRS GAAP for SMEs (small and medium-sized entities). IFRS GAAP for SMEs is a condensed version of all the IFRSs in one book.
Below is a summary of the terms and ideas in the 'accounting framework'. It is important to be conversant with the terminology (even though some of your accounting colleagues struggle with this). Further extracts of the UK version of the framework are to be found in the appendix to this chapter. Do at least have a look; you will probably find it all rather verbose and rather obvious, but this is the state of accounting today.
Financial position - the balance sheet
The financial position of an entity is the relationship of its assets, liabilities and equity as of a specific date as presented in the statement of financial position. These are defined as follows:
An asset is a resource controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity. A liability is a present obligation of the entity arising from past events,
the settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits. Equity is the residual interest in the assets of the entity after deducting
all its liabilities.
Some items that meet the definition of an asset or a liability may not be recognized as assets or liabilities in the statement of financial position because they do not satisfy the criteria for recognition. In particular, the expectation that future economic benefits will flow to or from an entity must be sufficiently certain to meet the probability criterion before an asset or liability is recognized.