Accounting Principles (GAAP) Are Important to Financial Essay

Pages: 2 (598 words)  ·  Style: APA  ·  Bibliography Sources: ≈ 2  ·  File: .docx  ·  Level: College Senior  ·  Topic: Accounting

¶ … Accounting Principles (GAAP) are important to financial statements because they allow for statements that are consistent across all public companies. This allows all external stakeholders, including regulators, shareholders and potential investors to be able to analyze the statements easily, and compare them to the statements of other companies.

Whereas the GAAP are country-specific (fore example, American GAAP and Canadian GAAP), International Accounting Standards (ISFR) cover countries around the world. These standards serve the same function in the development of liquid and transparent capital markets as the GAAP, but on an international basis.

Liquidity is an important concept for financial statements, because it reflects the ability of a company to pay its debt obligations. A liquid company can pay its debt; an illiquid company cannot. Financial analysis via the financial statements is often geared to examining liquidity issues at firms, as it is a key indicator of financial health.

Part II. Some of the differences between Unilever and Kraft stem from the fact that they use different accounting conventions. Unilever, being a British company, follows the International Accounting Standards. They only convert their statements to GAAP for submission to the SEC for their American depository receipts. Kraft is an American company, and therefore compiles its statements according to U.S. GAAP.Buy full Download Microsoft Word File paper
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Essay on Accounting Principles (GAAP) Are Important to Financial Assignment

For Unilever, the most useful is the cash from operating activities. The net income has risen steadily over the past several years, giving the impression of steadily improved performance. Cash from operating activities, however, has not been as stable, and for many years declined. The consistent steady growth in the net income is therefore not the result of successful operations. For Kraft, both are valuable. The company has seen a steady increase in revenues over the past several years. Cash flow from operating activities is perhaps the more… [END OF PREVIEW] . . . READ MORE

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"Accounting Principles (GAAP) Are Important to Financial."  Essaytown.com.  December 26, 2009.  Accessed July 4, 2020.
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