BALANCE SHEET TREATMENT IN ECUADOR VS. GAAP 1
The generallyaccepted accounting principles (GAAP) refer to guidelines that havebeen developed by the standard-setting boards such as the FinancialAccounting Standard Board (FASB) and the Governmental AccountingStandard Board (GASB) (Financial Accounting Foundation, 2016). Thesepolicies determine the reporting of monetary performances and theoperational results of companies (Financial Accounting Foundation,2016). Despite the existence of the international body charged withcreating the guiding principle for financial reporting, countrieshave developed distinct standards to facilitate reporting offinancials of the firms. These reporting standards determine thenature of statements prepared by the listed companies and otherinstitutions.
This paper seeksto conduct a comparison analysis about the treatment of notes,accounts, and wages payable in Ecuador and the United States. Thechoice of the topic is based on the fact that some of my cousins inEcuador are certified public accountants (CPAs), and it would beinteresting to understand how they deal with various financialstatements. Thereafter, I would wish to compare the reportingprinciples in Ecuador with the generally acceptable accountingstandards (GAAPs) are used in the United States. The evaluation willbe based on three areas namely notes, accounts and wages payable. Tocomplete the research, I have developed three strategies. In thefirst instance, I will visit the library and source for informationrelating to notes, accounts and wages payable. Secondly, I willcontact my cousins in Ecuador and enquire from them how the financialstatements are prepared in the country. Finally, I will use the classbook to find any missing facts.
Under the GAAPguidelines, accounts payables are listed as current liabilities inthe balance sheet because they are short-term financial obligations.It refers to the amount of money a company is yet to pay itssuppliers. On the other hand, notes payables refer to documents thatare issued to organizations once they have secured loans fromfinancial institutions. They are listed on the balance sheet aseither long-term or short-term liabilities depending on the period ofrepayment. Wages payables refer to the amount of wages that a companyowes its employees. It is, therefore, indicated as a short-termliability in the balance sheet.
In Ecuador,companies are required to adhere to the International FinancialReporting Standards (IFRS) that have been provided by the board(Pacter, 2016). No modifications are made to the guidelines. Based onthese conditions, the Ecuadorian financial reporting standards willlist notes, payables and wages payables as short–term liabilitiesin the balance sheet in compliance with the IFRS (Pacter, 2016).
Financial Accounting Foundation. (2016). About GAAP. Retrieved fromhttp://www.accountingfoundation.org/cs/ContentServer?c=Page&pagename=Foundation%2FPage%2FFAFBridgePage&cid=1176164538898
Pacter, P. (2016). Pocket Guide to IFRS Standards: the globalfinancial reporting language. London: IFRS Foundation