OMAR KASHIF SOLANGI MBAE-1B FINANCIAL ACCOUNTING SUBMITTED TO AMIR BASHIR 26 August 2011

Generally Accepted Accounting Principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as Accounting Standards. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing, and in the preparation of financial statements. The term "GAAP" is an abbreviation for Generally Accepted Accounting Principles (GAAP). GAAP is a codification of how CPA firms and corporations prepare and present their business income and expense, assets and liabilities on their financial statements. GAAP is not a single accounting rule, but rather the aggregate of many rules on how to account for various transactions. There are different types of GAAP followed around the world, among them are: US GAAP UK GAAP Canada GAAP

The various rules and pronouncements come from the Financial Accounting Standards Board (FASB) which is a non-profit organization that the accounting profession has created to promulgate the rules of GAAP reporting and to amend the rules of GAAP reporting as occasion requires. The more recent pronouncements come as Statements of the Financial Accounting Standards (SFAS). GAAP is slowly being phased out in favor of the International Accounting Standards as the global business becomes more pervasive. GAAP applies only to United States financial reporting and thus an American company reporting under GAAP might show different results if it was compared to a British company that uses the International Standards. While there is tremendous similarity between GAAP and the International Rules, the differences can lead a financial statement user to incorrectly believe that company A made more money than company B simply because they report using different rules. The move towards International Standards seeks to eliminate this kind of disparity. Many countries use or are converging on the International Financial Reporting Standards (IFRS), established and maintained by the International Accounting Standards Board. In some countries, local accounting principles are applied for regular companies but listed or large companies must conform to IFRS, so statutory reporting is comparable internationally, across jurisdictions. Countries that are following IFRS are: Australia European Union Hongkong India Taiwan Japan Pakistan Singapore Turkey

So it can be said that FASB and IASB are two bodies promulgating standards, GAAP comes under FASB and IFRS comes under IASB which is now more frequently used internationally.

In Pakistan International Financial reporting Standards (IFRS) are followed by businesses for reporting and preparation of financial Statements. IFRS governing body is International Accounting Standard Board (IASB) all over the world and in Pakistan in collaboration with Institute of Chartered Accountants of Pakistan (ICAP) it is made sure that the relevant accounting standards are followed accordingly.Section. 234 of Companies Ordinance requires mandatory compliance with the accounting standards that are notified by SECP.SECP notifies standards on the recommendation of ICAP council. ICAP Council approves the adoption of each standard on the recommendation of professional standards committee. Each IAS/IFRS is reviewed by two regional Accounting Standards Committees and a due process of exposure to the members and other stakeholders is carried out prior to recommending adoption. The Financial Statements are prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of Companies Ordinance, 1984. Wherever the requirements of companies ordinance 1984 or directives issued by SECP differ with the requirements of these standards, the requirements of Companies Ordinance 1984 shall prevail.