In demonology, apparently, GAAP is “a mighty Prince and Great President of Hell, commanding sixty-six legions of demons… [H]e can cause love or hate and make men insensible and invisible. . . . According to a few authors he can make men ignorant.” In business, GAAP is Generally Accepted Accounting Principles. According to a USA Today story today, these principles are not followed by the US Government, which is more inclined to stick with methods that make men ignorant:
The federal government keeps two sets of books. The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005. The set the government doesn’t talk about is the audited financial statement produced by the government’s accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included as the board that sets accounting rules is considering the federal deficit would have been $3.5 trillion. Congress has written its own accounting rules which would be illegal for a corporation to use because they ignore important costs such as the growing expense of retirement benefits for civil servants and military personnel.
The U.S. GAAP starts with the principles that accounting should be: * useful to present and potential investors and creditors and other users in making rational investment, credit, and other financial decisions. * helpful to present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts. * about economic resources, the claims to those resources, and the changes in them. This seems reasonable. At a minimum, we should live up to these principles, and then we must inevitably aim higher, as the standards for citizens have to be higher than those for businesses. We are not merely investing, we are governing through our choices. In the meantime, the more timely information about spending and income the better, as citizen accountants can simultaneously mash and respond to the information as it comes in.