GAAPs

GAAPs is the term used to refer collectively to the generally accepted accounting principles that govern financial reporting in a given jurisdiction. They are a set of rules and conventions used to prepare financial statements and cover recognition, measurement, presentation, and disclosure. GAAPs are designed to provide consistency, reliability, and comparability of financial information across entities and over time, and are established by national or regional standard-setting bodies and enforceable for statutory reporting.

In the United States, GAAP refers to standards issued by the Financial Accounting Standards Board (FASB) and codified in the Accounting Standards Codification. The body of US GAAP addresses topics such as revenue recognition, leases, inventories, financial instruments, impairment, and other areas, and it has a predominantly rules-based orientation though it incorporates principles-based elements in newer standards.

Other jurisdictions maintain their own GAAPs. Some countries have adopted International Financial Reporting Standards (IFRS) as the basis for public company reporting, while others retain distinct GAAP frameworks or blends of GAAP and IFRS. Differences between GAAPs can affect reported earnings, asset values, and disclosures, complicating cross-border comparability.

GAAPs evolve through formal due process that includes exposure drafts, public comment periods, and scheduled implementation dates. Compliance is generally required by law or regulation, and independent audits assess whether financial statements conform to the applicable GAAP.