{"id":75,"date":"2024-09-06T16:46:11","date_gmt":"2024-09-06T16:46:11","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/significant-events-in-accounting\/"},"modified":"2024-09-11T21:55:18","modified_gmt":"2024-09-11T21:55:18","slug":"significant-events-in-accounting","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/significant-events-in-accounting\/","title":{"raw":"Significant Events in Accounting","rendered":"Significant Events in Accounting"},"content":{"raw":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\r\n<ul>\r\n \t<li>Identify significant events in the history of accounting<\/li>\r\n \t<li>Identify the organizations that govern accounting<\/li>\r\n<\/ul>\r\n<\/section>Over the past five hundred plus years, accounting has seen its share of ups and downs. Here are some of the highlights of accounting in the Western world (with a focus on practices and events that impact accounting in the United States):\r\n\r\n<section class=\"textbox interact\" aria-label=\"Interact\"><iframe src=\"https:\/\/lumenlearning.h5p.com\/content\/1291129887855014758\/embed\" width=\"1088\" height=\"637\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" aria-label=\"Accounting in the Western World\"><\/iframe><script src=\"https:\/\/lumenlearning.h5p.com\/js\/h5p-resizer.js\" charset=\"UTF-8\"><\/script><\/section>As you go through your career in accounting, you\u2019ll find things to add to this list, but for now, you have a pretty good historical perspective of how we got from the first structured bookkeeping to the 21st Century.\r\n\r\n<section class=\"textbox tryIt\" aria-label=\"Try It\">[ohm2_question hide_question_numbers=1]25103[\/ohm2_question]<\/section>\r\n<h2>Regulations in Accounting<\/h2>\r\nAccounting in the United States is a multi-layered profession. There are some regulations all businesses must adhere to, like the tax code. Then there are strict SEC standards that only large, publicly-traded companies are subject to, and while some companies that aren\u2019t subject to these rules may follow these same standards as best practices\u2014especially when creating externally facing reports\u2014they aren't technically required to do so. Additionally, for internal (managerial) accounting purposes across all companies, there are some best-practices, but nothing is carved in stone.\r\n\r\nLet's take a look at a few of the accounting authorities in the United States.\r\n<h3>SEC<\/h3>\r\n<img class=\"alignright wp-image-2833\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/08\/10221142\/Seal_of_the_United_States_Securities_and_Exchange_Commission.svg_-1024x1024.png\" alt=\"Seal of the United States Securities and Exchange Commission\" width=\"400\" height=\"400\" \/>The US Securities and Exchange Commission (SEC) has the legal authority to provide oversight and regulation of the accounting profession. However, SEC policy is to stay in the background and allow industry self-regulation. Private organizations provide governance and establish professional accounting standards.\r\n\r\nSince its inception in 1934, the SEC has worked closely with the US Department of Justice to prosecute individuals and corporations for securities fraud at all levels. Some defendants have been high-profile investors, including the following:\r\n<ul>\r\n \t<li>Businesswoman Martha Stewart<\/li>\r\n \t<li>Kenneth Lay (of failed Enron Corporation)<\/li>\r\n \t<li>NFL quarterback Fran Tarkenton<\/li>\r\n \t<li>Fraudulent stock trader Ivan Boesky<\/li>\r\n \t<li>Investor Bernie Madoff<\/li>\r\n<\/ul>\r\n<h3>FASB<\/h3>\r\nThe Financial Accounting Standards Board (FASB) is the organization officially recognized by the SEC as the governing body for the accounting profession. The FASB was created in 1973, replacing its predecessor organization, the Accounting Principles Board. However, the FASB continues to use some APB standards that have never been superseded. The FASB operates under the oversight of the Financial Accounting Foundation. The American Institute of Certified Professional Accountants (AICPA) also sets accounting profession standards and rules in cooperation with the FASB.\r\n\r\nThe body of financial accounting standards and rules published in FASB, APB, and AICPA pronouncements is collectively known as <strong>generally accepted accounting principles<\/strong> or GAAP, which we'll discuss in further detail later. The GAAP guidelines cover all major accounting activities and topics including disclosure, assessing risk or uncertainty, and preparing financial statements. The United States is the only country that uses Generally Accepted Accounting Principles (GAAP).\r\n\r\nThe\u00a0FASB and AICPA also set professional standards for auditors, known as <strong>generally accepted accounting standards<\/strong>, or GAAS.\r\n<h3>IRC<\/h3>\r\nAll accounting professionals must comply with the rules and regulations of the Internal Revenue Code. The IRC furnishes federal tax law guidelines in the United States through an administrative agency: the Internal Revenue Service (IRS). Some people confuse the IRS with the IRC. The IRS is a department of the US Treasury. The IRC is the actual law that establishes income and other taxes.\r\n<h3>IASB<\/h3>\r\nThe International Accounting Standards Board is the standard-setting body for International Financial Reporting Standards (IFRS). IFRS are used in 166 jurisdictions as of October 2020, including the European Union (EU) and many countries in Asia and South America.\r\n\r\nAs you develop in your accounting career, or as a small business owner or consultant, you\u2019ll know to refer to these different organizations' standards as you navigate the complex world of the rules and regulations that govern accounting and business.\r\n\r\n<section class=\"textbox tryIt\" aria-label=\"Try It\">[ohm2_question hide_question_numbers=1]25104[\/ohm2_question]<\/section>","rendered":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\n<ul>\n<li>Identify significant events in the history of accounting<\/li>\n<li>Identify the organizations that govern accounting<\/li>\n<\/ul>\n<\/section>\n<p>Over the past five hundred plus years, accounting has seen its share of ups and downs. Here are some of the highlights of accounting in the Western world (with a focus on practices and events that impact accounting in the United States):<\/p>\n<section class=\"textbox interact\" aria-label=\"Interact\"><iframe loading=\"lazy\" src=\"https:\/\/lumenlearning.h5p.com\/content\/1291129887855014758\/embed\" width=\"1088\" height=\"637\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" aria-label=\"Accounting in the Western World\"><\/iframe><script src=\"https:\/\/lumenlearning.h5p.com\/js\/h5p-resizer.js\" charset=\"UTF-8\"><\/script><\/section>\n<p>As you go through your career in accounting, you\u2019ll find things to add to this list, but for now, you have a pretty good historical perspective of how we got from the first structured bookkeeping to the 21st Century.<\/p>\n<section class=\"textbox tryIt\" aria-label=\"Try It\"><iframe loading=\"lazy\" id=\"ohm25103\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=25103&theme=lumen&iframe_resize_id=ohm25103&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n<h2>Regulations in Accounting<\/h2>\n<p>Accounting in the United States is a multi-layered profession. There are some regulations all businesses must adhere to, like the tax code. Then there are strict SEC standards that only large, publicly-traded companies are subject to, and while some companies that aren\u2019t subject to these rules may follow these same standards as best practices\u2014especially when creating externally facing reports\u2014they aren&#8217;t technically required to do so. Additionally, for internal (managerial) accounting purposes across all companies, there are some best-practices, but nothing is carved in stone.<\/p>\n<p>Let&#8217;s take a look at a few of the accounting authorities in the United States.<\/p>\n<h3>SEC<\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-2833\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/08\/10221142\/Seal_of_the_United_States_Securities_and_Exchange_Commission.svg_-1024x1024.png\" alt=\"Seal of the United States Securities and Exchange Commission\" width=\"400\" height=\"400\" \/>The US Securities and Exchange Commission (SEC) has the legal authority to provide oversight and regulation of the accounting profession. However, SEC policy is to stay in the background and allow industry self-regulation. Private organizations provide governance and establish professional accounting standards.<\/p>\n<p>Since its inception in 1934, the SEC has worked closely with the US Department of Justice to prosecute individuals and corporations for securities fraud at all levels. Some defendants have been high-profile investors, including the following:<\/p>\n<ul>\n<li>Businesswoman Martha Stewart<\/li>\n<li>Kenneth Lay (of failed Enron Corporation)<\/li>\n<li>NFL quarterback Fran Tarkenton<\/li>\n<li>Fraudulent stock trader Ivan Boesky<\/li>\n<li>Investor Bernie Madoff<\/li>\n<\/ul>\n<h3>FASB<\/h3>\n<p>The Financial Accounting Standards Board (FASB) is the organization officially recognized by the SEC as the governing body for the accounting profession. The FASB was created in 1973, replacing its predecessor organization, the Accounting Principles Board. However, the FASB continues to use some APB standards that have never been superseded. The FASB operates under the oversight of the Financial Accounting Foundation. The American Institute of Certified Professional Accountants (AICPA) also sets accounting profession standards and rules in cooperation with the FASB.<\/p>\n<p>The body of financial accounting standards and rules published in FASB, APB, and AICPA pronouncements is collectively known as <strong>generally accepted accounting principles<\/strong> or GAAP, which we&#8217;ll discuss in further detail later. The GAAP guidelines cover all major accounting activities and topics including disclosure, assessing risk or uncertainty, and preparing financial statements. The United States is the only country that uses Generally Accepted Accounting Principles (GAAP).<\/p>\n<p>The\u00a0FASB and AICPA also set professional standards for auditors, known as <strong>generally accepted accounting standards<\/strong>, or GAAS.<\/p>\n<h3>IRC<\/h3>\n<p>All accounting professionals must comply with the rules and regulations of the Internal Revenue Code. The IRC furnishes federal tax law guidelines in the United States through an administrative agency: the Internal Revenue Service (IRS). Some people confuse the IRS with the IRC. The IRS is a department of the US Treasury. The IRC is the actual law that establishes income and other taxes.<\/p>\n<h3>IASB<\/h3>\n<p>The International Accounting Standards Board is the standard-setting body for International Financial Reporting Standards (IFRS). IFRS are used in 166 jurisdictions as of October 2020, including the European Union (EU) and many countries in Asia and South America.<\/p>\n<p>As you develop in your accounting career, or as a small business owner or consultant, you\u2019ll know to refer to these different organizations&#8217; standards as you navigate the complex world of the rules and regulations that govern accounting and business.<\/p>\n<section class=\"textbox tryIt\" aria-label=\"Try It\"><iframe loading=\"lazy\" id=\"ohm25104\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=25104&theme=lumen&iframe_resize_id=ohm25104&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n","protected":false},"author":6,"menu_order":20,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Significant Events in Accounting\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"pd\",\"description\":\"\",\"author\":\"\",\"organization\":\"Wikipedia\",\"url\":\"https:\/\/commons.wikimedia.org\/wiki\/File:Seal_of_the_United_States_Securities_and_Exchange_Commission.svg\",\"project\":\"\",\"license\":\"pd\",\"license_terms\":\"\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":55,"module-header":"- Select Header -","content_attributions":[{"type":"original","description":"Significant Events in Accounting","author":"Joseph Cooke","organization":"Lumen Learning","url":"","project":"","license":"cc-by","license_terms":""},{"type":"pd","description":"","author":"","organization":"Wikipedia","url":"https:\/\/commons.wikimedia.org\/wiki\/File:Seal_of_the_United_States_Securities_and_Exchange_Commission.svg","project":"","license":"pd","license_terms":""}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/75"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/users\/6"}],"version-history":[{"count":5,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/75\/revisions"}],"predecessor-version":[{"id":1010,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/75\/revisions\/1010"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/parts\/55"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/75\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/media?parent=75"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=75"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/contributor?post=75"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/license?post=75"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}