Definition: is a report, which discloses and reveals the company’s accounting policies. Required by the rules of GAAP (Generally Accepted Accounting Principles), such a summary is supposed to contain and present all of the accounting principles that a company operates at; the ways and methods these principles are applied; how these methods influence the company’s financial position and its changes; and how appropriate those accounting principles are (in terms of funds allocation and revenue recognition). The summary of significant accounting policies may help the directors compare the financial statements of their company with the competitors. Moreover, an SSAP serves to help the outside business partners (such as creditors, investors, vendors, etc.) understand and get a clear picture of how certain accounting principles are used in the company’s financial operations.
In a Sentence:
Both non-profit and profitable companies should present the summary of significant accounting policies in order to determine their financial position.
Dealing with the summary of significant accounting policies, you can look at the changes of your company’s financial position in the market and develop your next business strategy based on that.
When there are numerous existing accounting alternatives, it is helpful to disclose the summary of significant accounting policies in order to compare all of the principles.
Synonyms and related words: accounting policies, Generally Accepted Accounting Principles (GAAP), financial accounting standards, principles-based accounting, generally recognized accounting practice