FINACC: Generally Accepted Accounting Principles GAAP

Generally accepted accounting principles

Generally accepted accounting principles (GAAP) are the standard framework of guidelines for financial accountingused in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements.

Many county and city governments in the United States choose to "opt out" of GAAP practices as they operate on a cash basis, as opposed to an accrual basis. A comparison would be the way that most people balance their checkbook: when a check is written, its amount is deducted from the total balance even though the funds have not yet left the account. Financial decisions made after the check is written are based on the balance after the check is deducted.

Many countries use or are converging on the International Financial Reporting Standards (IFRS) that was established and is maintained by the International Accounting Standards Board. In some countries, local accounting principles are applied for regular companies but listed or large companies must conform to IFRS, so statutory reporting is comparable internationally, across jurisdictions.

All listed and grouped EU companies have been required to use IFRS since 2005, Canada moved in 2009, Taiwan in 2013,^[2] and other countries are adopting local versions.

In the United States, while "...the SEC published a statement of continued support for a single set of high-quality, globally accepted accounting standards, and acknowledged that IFRS is best positioned to serve this role..." progress is less evident.