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Yellow co. received a large worker's compensation claim of $100,000 in the third quarter for an injury occurring in the third quarter. Yellow should recognize $100,000 in the third quarter.
In accordance with GAAP, expenses must be allocated to the relevant quarter or quarters. The entire expense is attributed to the third quarter because the injury happened in the third quarter.
A unified set of accounting guidelines, methods, and standards known as generally accepted accounting principles (GAAP) were released by the Financial Accounting Standards Board (FASB).
When their accountants put together a public company's financial statements, they must adhere to GAAP in the United States. Ten basic principles serve as the framework for GAAP, which is a set of regulations.
The International Financial Reporting Standards (IFRS), which are seen as more of a principles-based norm, are frequently used as a comparison. There have recently been initiatives to move GAAP reporting to IFRS because it is a more global standard.
To know more about GAAP:
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