Understanding GAAP (Generally Accepted Accounting Principles)

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What does GAAP stand for?

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Generally Accepted Accounting Principles

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What is the purpose of GAAP?

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To ensure consistency in financial statements for investors.

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What types of entities use GAAP?

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Publicly-traded companies, privately-held companies, non-profit organizations, and governments.

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What are the components of GAAP?

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Authoritative standards set by policy boards and commonly accepted ways of recording and reporting accounting information.

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What areas do GAAP cover?

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Revenue recognition, balance sheet item classification, and outstanding share measurements.

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Why are GAAP rules imposed on companies?

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To provide a minimum level of consistency in financial statements for investment analysis.

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What does GAAP include besides accounting principles?

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Local applicable Accounting Framework, related accounting law, rules, and Accounting Standards.