Could a privately held company benefit from using GAAP accounting, even though it isn’t legally required...
Could a privately held company benefit from using GAAP accounting, even though it isn’t legally required to do so? Why or why not?
Homework Answers
Yes, privately held company can benefit from using GAAP accounting, because of the following reasons
- Using GAAP accounting provides credibility of the financial statements.
- lenders and investors are willing to provide finance at lower cost to such private company.
- financial statements comply the fundamental standards such as consistency in applying accounting policies thereby enhancing its reliability and comparability.
- GAAP accounting is a standard based accounting which when used by private companies, standardize its accounting practices.
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