We just hate it when we’re right in the middle of telling a long, complicated story and some random goober walks up, listens for five seconds, and thinks they totally understand the whole situation. How can they grasp the big picture when they’re only looking at one itty-bitty piece of the puzzle?
This is the complaint lodged against “piecemeal opinions,” which are reports issued by accountants on the basis of very specific, finite data on an organization’s financial statements.
So who’s doing the complaining? Other accountants, that’s who. Piecemeal opinions get a big thumbs-down from those folks over at Team GAAP (Generally Accepted Accounting Principles). Since one piecemeal opinion could contradict and even offset a much more comprehensive and accurate opinion based on a larger financial picture, it was decided they shouldn’t be allowed anymore.
Related or Semi-related Video
![Cost Accounting: What is IFRS (Versus GAAP)?](https://media1.shmoop.com/video/thumbnails/CA.FINANCE.1304_770x433.jpg)
Cost Accounting: What is IFRS (Versus GA...0 Views
and finance Allah shmoop What is Fr s versus Gap
The United Nations versus well the U S Congress Interpol
versus the FBI Paris France versus while Paris Las Vegas
Or how about the International House of Pancakes versus the
Waffle House We're talking international versus domestic things that happen
in exotic foreign local's versus things that happen well you
know close to home Which brings us to my F
rst versus Gap Well FR s stands for international financial
reporting standard and it provides an international standard for accountants
to use when they're preparing their company's books It was
developed by the London based International Accounting Standards Board and
has been adopted by about 120 countries No one's told
it yet that it's been adopted though So you know
Mum's the word Our other acronym for the day Yes
Gap which you probably already know stands for generally accepted
accounting principles It represents a set of detailed accounting guidelines
The rules for Gap are laid out by the Financial
Accounting Standards Board a private nonprofit organization headquartered in the
U S Well even though gaffe was developed in the
US a lot of international companies use the guidelines in
their accounting prep If a company wants to do business
in the US well it needs its financial figures to
fit into gap standards And if it wants to draw
investors from the US well there's a big benefit to
complying with Gap Iaff RS and Gap are generally compatible
aside from the occasional tiff and the groups responsible for
the separate guidelines are constantly making tweaks to bring the
two into closer alignment Will as a result of comedy
doesn't really have to choose between the two However there
are some key differences It's a classic Venn diagram situation
A company can make decision so that it fits both
the two standards making everyone happy ish But there are
certain accounting choices that only fit into one or the
other For example I have far s allows fewer types
of inventory accounting Under Gap accounting a company can choose
between three methods of inventory accounting They can use weighted
average method right It represents the most vanilla Wei Tau
figure out the value of the finished product of the
company you know that it has sitting around its warehouse
or the company can use that fife over life Oh
business Fife Oh First in first out Well under this
system a company assumes that the oldest items it holds
in inventory are the 1st 1 sent out to clients
Then there's life O which is last in first out
and hear the most recently produced inventory gets shipped out
first Presumably the older stuff just sits around there gathering
dust and you'd use life Oh if you were heavily
involved in things that had volatile pricing like oil is
one of the key ingredients because the last gallon of
oil that went into the product whatever it is that
you're shipping presumably best reflects the most recent market value
or market pricing of that product Well under Gap accounting
a company looking to value its inventory can go with
weighted average life or Fife Oh however fr s on
ly allows two of these life foe is prohibited under
its guidelines So if company wants to be both Gap
and FR s compliant it would have to drop its
swing in life over lifestyle and switch to Fife Oh
so yeah that's just one example of differences between two
standards There are many little points of contention like that
a company can fit It's accounting practices into both But
doing so means sticking to a relatively narrow set of
rules like Well you can order the same stuff at
IHOP and Waffle House but you have to limit yourself
to a pretty limited diet of waffles and hash browns 00:03:26.245 --> [endTime] Mmm yummy
Up Next
What is Adverse Audit Opinion? An adverse audit opinion signals that an auditor has found flaws in a company’s financial statements. Adverse audi...