(GAAP)
Definition
Generally Accepted Accounting Principles (GAAP) are a set of rules and standards used for financial reporting in the United States. They ensure consistency, reliability, and comparability of financial statements across different organizations.
5 Must Know Facts For Your Next Test
- GAAP is established by the Financial Accounting Standards Board (FASB).
- GAAP includes principles like revenue recognition, matching, and full disclosure.
- Publicly traded companies in the U.S. are required to follow GAAP for their financial reporting.
- GAAP aims to improve transparency and trust in financial markets.
- Consistency is a fundamental principle of GAAP, ensuring that companies use the same methods from period to period.
Review Questions
- What organization establishes GAAP?
- Why is consistency important in GAAP?
- Name three key principles included in GAAP.
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Related terms
IFRS: International Financial Reporting Standards, used outside the U.S. for financial reporting.
FASB: The Financial Accounting Standards Board, responsible for establishing and updating GAAP.
Revenue Recognition Principle: A principle within GAAP that dictates how and when revenue should be recognized.
