According to Sundvik, (2019), Generally accepted accounting principles provide guidance to accountants that are necessary for recording and reporting financial information. If MoviesPlus Inc. followed GAAP, it would be required to apply the principles defined in GAAP to present its financial statements. Therefore, the firm would be expected to comply with the principles when distributing its financial statements. GAAP incorporates revenue recognition and financial statement preparations that require the employment of the defined principles. MoviesPlus would be required to maintain the defined standards in the entire process of presenting its revenue and financial statements. It would also ensure consistency and transparency in the procedures used for making financial statements (Hribar et. al, 2019). Moreover, the company will be required to disclose full information of its revenue and financial reports as per the principles and standards defined by GAAP.
MoviesPlus should consider integrating generally accepted accounting principles in its accounting department for presenting financial statements. However, the fact that MoviesPlus is not publicly traded limits the benefits of integrating GAAP in its accounting management. Nevertheless, it would attract investors into the company since the principles help in presenting financial statements that facilitate financial comparison making investors decide which firm to invest in (Hribar et. al, 2019). Moreover, the principles would ensure transparency and accuracy in financial statements generation and ensure consistency in the financing reporting procedures. Therefore, MoviesPlus should consider GAAP when it decides to be publicly traded since it would enjoy the benefit of cross-comparison of financial information across different firms that would improve its decisions on growth (Sundvik, 2019).
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The integration of GAAP into the firm can be considered as an ethical issue since it is concerned with the choices made in regard to presentation of the firm’s financial management. GAAP is concerned with the actions employed in the preparation of financial reports and statements. Consequently, GAAP defines various standards that must be adhered to avoid ethical issues scandals mostly experienced in different firms that have not integrated GAAP in their accounting management. Therefore, the principles and standards defined by GAAP prevent accounting issues hence maintaining transparency in financial statements.
References
Hribar, P., Mergenthaler, R., Roeschley, A., Young, S., & Zhao, C. X. (2019). GAAP Restrictions and Voluntary Disclosure. Available at SSRN 3308900 .
Sundvik, D. (2019). The impact of principles-based vs rules-based accounting standards on reporting quality and earnings management. Journal of Applied Accounting Research , 20 (1), 78-93.
