Accounting Policies for Reporting Income
Dana Ferretti
ACC 303
Dr. M. Austin Zekeri
Intermediate Accounting 1
November 20, 2011 Accounting Policies for Reporting Income GAAP (Generally Accepted Accounting Principles) refers to a common set of standards and procedures that companies follow to present their income and expenses, assets and liabilities of their financial statements. The FASB (Financial Accounting Standards Board) is the major operating organization that establishes and improves the rules of GAAP reporting. GAAP demands companies to disclose their accounting policies in their financial reports. The authoritative literature provided by the FASB, determines the classifications of comprehensive income and net income. Accounting policies are a group of specific policies that consist of principles, rules, and procedures that a company must follow when preparing and reporting its’ financial statements. These policies should include measurement systems, methods, and procedures for presenting disclosures. Accounting policies also include matters such as; depreciation methods, consolidation of accounts, inventory pricing, goodwill, and research and development costs. When these disclosures are presented, it assists the financial users and readers a better interpretation of the company’s financial status. [FASB 235-10-50] The authoritative literature of the FASB Accounting Standards Codification provides detailed knowledge of comprehensive income. According to the FASB, comprehensive income is defined as a change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from non-owner sources. (FASB ASC) It includes all changes in equity during a period except those resulting from investments by owners. Comprehensive
