1. What is UK GAAP

Question 1

What is the UK GAAP?

Answer 1

The UK GAAP is the rules, form whatever source, that govern accounting and financial reporting in the UK.

Question 2

What are the constituents of UK GAAP? (4)

Answer 2

In the UK generally accepted accounting practice is a combination of:
1. Company Law (The Companies Act 2006)
2. UK accounting standards, these being FRS 100 to FRS 105 (the accounting syllabus only covers FRS 102)
3. The effects of stock exchange listing requirements (which apply directly to listed companies but which are influential more widely); and
4. The effects of IFRS Accounting Standards

Question 3

What is the problem of ‘generally accepted’?

Answer 3

The problem of what is ‘generally accepted’ is not easy to settle, because new practices are obviously not generally adopted yet.

The criteria for a practice being generally accepted depend on factors such as whether the practice is addressed by UK accounting standards or legislation, or their international equivalents, and whether other companies have adopted the practice.

Most importantly perhaps, the questions should be whether the practice is consistent with the needs of users and the objectives of financial statements, and whether it is consistent with the ‘true and fair’ concept.