One of the differences between Managerial Accounting and Financial Accounting is reporting flexibility. Financial reporting is restricted...

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Accounting

One of the differences between Managerial Accounting andFinancial Accounting is reporting flexibility. Financial reportingis restricted by Generally Accepted Accounting Principles whereasreporting in Managerial Accounting has fewer rules.
Why is it permissible to violate Generally Accepted AccountingPrinciples when preparing reports used strictly by companymanagement? Should external users always have the same informationas internal users?

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ANSWER The rationale is explained in the longstanding discussion and even disagreement if generally accepted accounting principles GAAP should be applied to private companies The AICPA task force concluded that most of the constituencies in the 2004 study are of the opinion that it would be useful if the underlying accounting for public versus nonpublic private companies were different in certain situations It found that some of the GAAP requirements for public companies studied lack relevancedecision usefulness for private companies In addition the task force found that although respondents rated certain See Answer

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