Answer to Question #70210 in Accounting for SharonNeal
why are externally presented reports required to be prepared according to generally accepted accounting principles while internally presented managerial accounting reports are not?
The external financial statements should be based on IAS (or GAAP) requirements. The principles laid down in the order of reporting in accordance with these standards make it more adequate and capable to reflect the real property and business condition of the organization. In this regard, the value of IAS is important not only for foreign but also for national investors.
Also, the main users of external financial reports are the creditor, potential investor or other community representative who will use the reports to make financial decisions.
On the contrary, there are no generally accepted standards for internal reporting. This is due to factors such as: the list of users of reporting, the level of confidentiality and the level of continuity of information. In particular, users of internal management reporting include managers, board of directors or other parties that operate within the organization. The content and completeness of internal reports depends on the level of access to commercial information.