Which of the following statement(s) is(are) correct? Companies that use the disclosed basis of accounting are in effect using differential reporting. Companies that use the disclosed basis of accounting are NOT allowed to use differential reporting. When used, the disclosed basis of accounting must comply with GAAP. Both "companies that use the disclosed basis of accounting are NOT allowed to use differential reporting" and "when used, the disclosed basis of accounting must comply with GAAP" are correct.

Correct statement is :

Option D: Both "companies that use the disclosed basis of accounting are NOT allowed to use differential reporting" and "when used, the disclosed basis of accounting must comply with GAAP" are correct.

Explanation:

The two most popular sources of 'Accounting Standards' in the U.S. are GAAP and IFRS.

The 'disclosed basis of accounting' means all the pertinent policies of accounting are listed  in a company's annual report . So, the companies gthat follow this are not allowed to use 'differential reporting', according to which there are some entities should be allowed not to be mentioned in the requirements of accounting standards. Since, these companies list their policies, they are not allowed differential reporting.

Thus, Option D is the most appropriate statement.

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