Accounting principles can be thought of as a framework in which a company is expected to operate. First-in, first-out (FIFO) is an asset-management and valuation method in which the assets produced or acquired first are sold, used, or disposed of first. This should be taken into account by investors when reviewing earnings reports to assess the quality of earnings. Generally Accepted Accounting Principles (GAAP). GAAP Guidebook IFRS Guidebook Public Company Accounting and Finance, Accounting BestsellersAccountants' GuidebookAccounting Controls Guidebook Accounting for Casinos & Gaming Accounting for InventoryAccounting for ManagersAccounting Information Systems Accounting Procedures Guidebook Agricultural Accounting Bookkeeping GuidebookBudgetingCFO GuidebookClosing the Books Construction AccountingCost Accounting FundamentalsCost Accounting TextbookCredit & Collection GuidebookFixed Asset AccountingFraud ExaminationGAAP GuidebookGovernmental Accounting Health Care Accounting Hospitality Accounting IFRS GuidebookLean Accounting Guidebook New Controller GuidebookNonprofit Accounting Oil & Gas Accounting Payables ManagementPayroll ManagementPublic Company Accounting Real Estate Accounting, Finance BestsellersBusiness Ratios GuidebookCorporate Cash ManagementCorporate FinanceCost ManagementEnterprise Risk ManagementFinancial AnalysisInterpretation of FinancialsInvestor Relations GuidebookMBA GuidebookMergers & AcquisitionsTreasurer's Guidebook, Operations BestsellersConstraint ManagementHuman Resources GuidebookInventory Management New Manager Guidebook Project ManagementPurchasing Guidebook, Summary of significant accounting policies. The Summary of Significant Accounting Policies: Explains the important accounting choices the reporting entity uses to account for selected transactions and accounts. It's a serious process as policies affect an entire company. So why is it important to disclose significant accounting policies? Her articles have been published in national magazines such as the "Journal of Accountancy," "Architecture Business and Economics" and "Veterinary Economics." In the non-profit sector, spending policies have become popular, especially when endowments are present. Accounting policies are usually approved by top management and do not change much throughout the years. Last in, first out (LIFO) is a method used to account for inventory that records the most recently produced items as sold first. The Securities and Exchange Commission requires full disclosure of policies regarding items that involve estimations and that are material to the financial statements. These frameworks require an organization to disclose its most important policies, the appropriateness of those policies, and how they impact the reported financial position of the firm. The offers that appear in this table are from partnerships from which Investopedia receives compensation. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Segregation of duties is usually part of internal control policy. Accounting principles are the rules, and accounting policies are how a firm adheres to these rules. They are significant for the following reasons – Many policies are not optional, but mandatory, especially if you are dealing with a public firm. The policy summary can include policies from a broad range of operational and financial areas, including cash, receivables, intangible assets, asset impairment, inventory valuation, types of liabilities, revenue recognition, and capitalized costs. They are developed for long-term use, reflecting a firms’ values and ethics. Under the LIFO method, when a product is sold, the cost of the inventory produced last is considered to be sold. These policies may differ from company to company, but all accounting policies are required to conform to generally accepted accounting principles (GAAP) and/or international financial reporting standards (IFRS). Based on this act, many firms now have a whistle-blower policy where employees can call in reporting possible fraud. Because accounting principles are lenient at times, the specific policies of a company are very important. Accounting principles can be very general at times, so policies can be very important. Accounting policies are usually approved by top management and do not change much throughout the years. Accounting policies are important to any business to maintain consistency and to set up a standard for decision-making.