Thursday, August 30, 2007

Accounting standards permit choice from alternatives

Financial Accounting for Management
Ambrish Gupta

A common belief is that when companies follow the GAAPs (generally accepted accounting principles) you can be assured of dependable disclosures. Not always true. Because "GAAPs provide leverage to the management in influencing the bottom line in two ways," writes Ambrish Gupta in Financial Accounting for Management, second edition (

One, accounting standards permit choice from alternatives, as a result of which discretion is available in many areas, such as valuation of fixed assets, methods of depreciation, assets under finance lease, impairment of assets, and so on.

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