Accounting Discussion: US GAAP, VBM, and Corporate Governance Analysis

This discussion post addresses two key questions in accounting. The first question explores the historical development of accounting standards in the United States, highlighting the roles of organizations like the AICPA, FASB, and SEC, and the factors influencing these standards such as legal systems and business complexity. The second question explains value-based management (VBM), emphasizing its role in maximizing shareholder value by managing relationships with stakeholders and the impact of corporate governance on management decisions, particularly in prioritizing accountability when making investment decisions. The post also references key sources such as Corporate Finance Institute, Scarlett (2001), and Wilkinson (2013).

Running head: ACCOUNTING
Accounting
3-13-2020

ACCOUNTING 1
Q1.
The accounting standards have been historically established by the American Institute of
Certified Public Accountants. The Financial Accounting Foundation is accountable to
provide input and advice related to the accounting standards. The factors that influence
accounting are legal system, complexity of the business entity, level of legislative
interference, political system, ownership nature, speed of business innovation, etc.
(Accounting, 2020).
The AICPA in the initial phase developed an Accounting procedure committee in the year
1939 and replaced it with the Accounting Principles Board in 1959. Then in the year 1973, it
was replaced by the Financial Accounting Standards Board under the guidance of the
Financial Accounting Foundation for providing the input in the accounting standards. Some
other organizations that took involvement in the accounting standards of the US are the
Federal Accounting Standards Advisory Board and the Governmental Accounting Standards
Board. In the year 2008, the Security and Exchange Commission introduced an introductory
roadmap that supports the country to abandon GAAP in the coming future and also to involve
around 100 nations (Accounting, 2020).
The organizations that majorly influenced the GAAP in the US are AICPA, IRS, FASB, and
SEC. This is because GAAP principles are different from other accounting standards applied
in international market, but organizations such as FASB and IASB are operating to introduce
an acceptable accounting standard at international level (Wilkinson, 2013).
Q2.
Value-based management is said to be the management approach as well as philosophy that
allow and assist in the creation of maximum value within organizations, classically the

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shareholder value maximization. VBM includes a procedure for making, handling, and
measuring the value (Scarlett, 2001).
Shareholder value is related to the interaction between a product and capital market. To
increase free cash flow, a business has to manage its relations with the stakeholders. For
example, business that charge high prices for their products will result in losing them to the
rivals. But, on the other side business that charges low amounts to make customer happy may
end their day by not meeting their financial obligations and enhanced products to the
consumers. In addition to this, the shareholder value is considered to be the financial worth
that is received by the business owners for holding the company’s shares. An increase in the
shareholder value is created along with a higher return on capital invested by the company. In
simple words, shareholder value is created at the time when business work effectively then
they expect (Corporate Finance Institute, 2020).
Corporate governance is a framework that works to set high integrity thresholds to protect the
shareholders, employees, suppliers, and creditors' interest. Businesses that meet these
thresholds should be ethical, sensitive, and accountable in their decisions of investment. This
is because corporate governance allows business to prioritize accountability at the time of
making decision-related to investment.

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References
Corporate Finance Institute. (2020). What is Shareholder Value? Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/strategy/shareholder-value/
Scarlett, R. (2001). Value Based Management 2nd ed. Netherlands: Elsevier.
Wilkinson, J. (2013). Generally Accepted Accounting Principles (GAAP) Definition.
Retrieved from https://strategiccfo.com/generally-accepted-accounting-principles-gaap/
Accounting. (2020). What is GAAP? Retrieved from
https://www.accounting.com/resources/gaap/