Generally Accepted Accounting Principles
Rules to which accountants adhere when preparing financial statements. The Generally Accepted Accounting Principles exist to ensure that American accountants are using the same or almost the same standards so that comparison of financial statements between or within a company is easy and accurate. They also promote transparency in accounting. The GAAP are set by the FASB. See also: International Financial Reporting Standards .
Generally accepted accounting principles (GAAP).
Generally accepted accounting principles (GAAP), which are the basis for financial reporting by the private sector in the United States, have been codified by the Financial Accounting Standards Board (FASB) into a single authoritative source.
The codification is designed to strengthen the economic system by organizing standards from various sources into approximately 90 accounting topics and providing uniform criteria for communicating data. The code is scheduled for final adoption at the end of 2008 following a one-year verification period.
(pronounced “gap”) Generally accepted accounting principles declared by the Financial Accounting
Standards Board (FASB).
Generally Accepted Accounting Principles (GAAP)
What Does Generally Accepted Accounting Principles (GAAP) Mean?
The overriding accounting principles, standards, and procedures that companies follow when compiling their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information.
Investopedia explains Generally Accepted Accounting Principles (GAAP)
Companies use GAAP to standardize their financial statements so that investors can better use those statements to analyze a company for investment purposes. GAAP covers things such as revenue recognition, balance sheet item classification, and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data in their financial statements. If a financial statement is not prepared using GAAP principles, investors should be very wary! That said, GAAP is only a set of guidelines, and that leaves plenty of room for interpretation by unscrupulous accountants to distort figures. Thus, even with GAAP, one should not put complete faith in the numbers companies report.