The definition of “Accounting” given by the American Institute of Certified Public Accountants is the following: 

“The art of recording, classifying, summarising in a significant manner and in terms of money, transactions and events which are, in part at least of financial character, and interpreting the results thereof”

Accounting, in addition to record transactions and transmit the financial position of a company, includes also the analysis and reporting the relevant information in specific documents called “financial statements”. 

GAAP - GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Financial Accounting Standards Board (FASB) in the USA has created “Generally Accepted Accounting Principles (GAAP)” , that make reference to a common set of accounting principles, standards and procedures. GAAP is a mix of commonly accepted methods of recording and reporting accounting information and authoritative standards established by policy councils. 

IFRS - International Financial Reporting Standards

At International level, the IFRS - International Financial Reporting Standards corresponds to GAAP adopted in the United States. 

IFRS are followed in over 120 countries, including those of the European Union (EU).

Originally there were the IAS - International Accounting Standards, the International Accounting Standards created in 1973 as the first attempt to make accounting rules uniform worldwide.

Subsequently, these standards were revised and took the name of IFRS (International Financial Reporting Standards), which were introduced starting in 2001, approved by community regulation within the European Community.

Banks, insurance companies, financial companies and publicly traded companies must employ these principles. Other companies may choose this option unless they have the opportunity to make financial statements in abbreviated form.