Introduction to GAAP
GAAP stands for Generally Accepted Accounting Principles. It provides guidance on financial statement preparation and presentation. The FASB Accounting Standards Codification is the source of authoritative GAAP recognized by the FASB for application by nongovernmental entities. GAAP standards cover a variety of accounting topics such as revenue recognition and inventory valuation.
U.S. GAAP Overview
US GAAP, regulated by the Financial Accounting Standards Board (FASB), is a set of accounting principles used in the United States. The FASB published U.S. GAAP in Extensible Business Reporting Language (XBRL) to enhance accessibility. Key principles of GAAP include revenue recognition, cost, matching concept, and disclosures.
Importance of GAAP
GAAP aims to ensure consistency in financial reporting and is enforced by the SEC. The FASB Codification structures accounting rules for better usability.
Conclusion
Many countries use International Financial Reporting Standards (IFRS) rather than GAAP.
Additional Information
- There are 10 core GAAP principles.
- The SEC mandates public companies to follow GAAP.
- The FASB sets overall GAAP guidelines; the Governmental Accounting Standards Board sets standards for governments.