GAAP (Generally Accepted Accounting Principles) is a set of accounting standards and guidelines that are widely accepted and followed by companies in the United States. These principles provide a framework for financial reporting and ensure consistency, comparability, and transparency in financial statements. GAAP covers various aspects of accounting, including revenue recognition, expense recognition, asset valuation, and financial statement presentation. Compliance with GAAP is important for companies to provide accurate and reliable financial information to stakeholders, such as investors, creditors, and regulators.
GAAP stands for Generally Accepted Accounting Principles.
The purpose of GAAP is to provide a standardized framework for financial reporting, ensuring consistency, comparability, and transparency in financial statements.
GAAP is established by the Financial Accounting Standards Board (FASB) in the United States.
In the United States, publicly traded companies are required to follow GAAP. However, private companies may choose to follow GAAP voluntarily.
In certain circumstances, a company may deviate from GAAP if it can justify the departure and disclose the impact on its financial statements.
Yes, International Financial Reporting Standards (IFRS) is an international equivalent to GAAP used in many countries outside the United States.
Failure to follow GAAP can result in financial penalties, legal disputes, loss of investor confidence, and damage to a company’s reputation.
GAAP is subject to regular updates and revisions by the FASB to reflect changes in business practices, accounting standards, and regulatory requirements.
Yes, GAAP can be applied to non-profit organisations, although there may be specific accounting standards and guidelines tailored for the non-profit sector.
The latest GAAP guidelines can be found on the FASB’s official website or through various accounting resources and publications.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 13th April 2024.
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