GAAP

GAAP, or Generally Accepted Accounting Principles, is the set of accounting standards and procedures used for financial reporting in the United States. It provides the framework for preparing, presenting, and disclosing financial statements so users can compare entities and assess performance and financial position. GAAP covers recognition, measurement, presentation, and disclosure of financial information.

GAAP in the United States is established and maintained primarily by the Financial Accounting Standards Board (FASB). The Securities and Exchange Commission (SEC) oversees GAAP compliance for publicly traded companies, and many private enterprises adopt GAAP for financial reporting. In 2009 FASB codified GAAP into the Accounting Standards Codification (ASC), which organizes standards by topic. FASB issues Accounting Standards Updates (ASUs) to amend or add standards.

Core concepts include accrual accounting, the historical cost principle with fair value used for certain assets and liabilities, and revenue recognition under ASC 606. The matching principle, consistency, materiality, and conservatism guide reporting. GAAP emphasizes comprehensive disclosure to enhance transparency. Specific areas include revenue recognition, leases under ASC 842, and asset impairment and fair value measurements under ASC 820.

GAAP is primarily used by US-listed companies and many private firms; many multinational corporations report US GAAP in the United States and may reconcile to IFRS for other jurisdictions. IFRS, used in many countries, is generally more principles-based, whereas GAAP contains more detailed, rule-based guidance. Convergence efforts have occurred, but the standards remain distinct, with ongoing projects and several country-specific differences.