The Accounting Standards Board (AASB) is an independent statutory board that sets accounting standards for public companies in Australia. The Generally Accepted Accounting Principles (GAAP) are the standards set by the Financial Accounting Standards Board (FASB) in the United States. There are some key differences between GAAP and AASB, which this article will explore.
What is GAAP?
GAAP (Generally Accepted Accounting Principles) is a set of standards and guidelines that companies use to report their financial information.
- GAAP is designed to promote transparency and consistency in financial reporting, making it easier for investors and analysts to compare financial statements from different companies.
- GAAP is overseen by the Financial Accounting Standards Board (FASB), which is a private, nonprofit organization that sets accounting standards in the United States.
- While GAAP is not legally binding, most public companies in the United States follow GAAP standards when preparing their financial statements.
What is AASB?
AASB is the Australian Accounting Standards Board. AASB is responsible for developing and issuing accounting standards in Australia. AASB was established in 1973 by the Australian Government.
- AASB is a member of the International Accounting Standards Board (IASB). AASB is funded by the Australian Government and accounting standard-setters in Australia.
- AASB has a board of fourteen members, which includes eleven members who are appointed by the Minister for Financial Services and Regulation, and three members who are appointed by the IASB.
- AASB’s mission is to develop, issue and maintain high quality, globally converged financial reporting standards for use in Australia that serve the public interest and enhance confidence in the financial reporting framework.
AASB’s principles are independence, transparency, accountability, consultation, due process and high quality.
Difference between GAAP and AASB
GAAP and AASB are both accounting frameworks that dictate how financial statements should be prepared.
- GAAP, or Generally Accepted Accounting Principles, is the set of guidelines that have been established by the Financial Accounting Standards Board in the United States. AASB, or Australian Accounting Standards Board, is the equivalent organization in Australia.
- While GAAP and AASB have many similarities, there are also some key differences. GAAP is more comprehensive than AASB, with over 100 different standards that cover everything from revenue recognition to leases.
- AASB, on the other hand, has just over 50 standards. another key difference is that GAAP is rules-based, while AASB is principles-based. This means that GAAP lays out specific rules that must be followed, while AASB provides guidance on how to apply accounting principles in a given situation.
As a result, GAAP is generally considered to be more rigid than AASB. Finally, GAAP is updated on a regular basis, while AASB is updated every three years. These updates give GAAP the flexibility to keep up with changes in the business world, while AASB may lag behind slightly. Overall, GAAP and AASB are both important accounting frameworks with their own strengths and weaknesses.
The goal of this post was to clear up any confusion there may be between GAAP and AASB. We’ve outlined the key differences between the two accounting practices and explained why it is important for businesses to adhere to one standard or the other. If you are still unsure about which set of rules to follow, reach out to your accountant or bookkeeper for clarification.