US GAAP vs IFRS
GAAP is the United States’ accounting guidelines for every traded public company. GAAP has more rules, while IFRS uses more principles.
Importance of GAAP in Financial Reporting
- GAAP enhances the comparability of financial statements through the standardization of accounting methods and statement presentation.
- Businesses can ensure that their financial statements are consistent and comparable, which is essential for investors and stakeholders to make informed decisions.
- Adherence to these standards can help prevent financial fraud and misrepresentation.
The Role of FASB in Setting US Standards
- The Financial Accounting Standards Board (FASB) sets the US standards and publishes the sole authoritative US GAAP source, the Accounting Standards Codification.
- Public US companies must follow GAAP for financial statements to ensure consistent, comparable statements.
Additional Information on GAAP
- GAAP is widely used in governmental accounting.
- An accounting standard is a guiding standardized principle determining financial accounting policies and practices.
- Standards enhance reporting transparency through revenue recognition and goodwill accounting.