The one responsible for these regulations and standards is the Financial Accounting Standards Board (FASB). GAAP is mainly focused on the accounting and financial reporting of U.S companies.
This helps investors analyze information from the company’s financial statements such as the earnings reports. It helps standardize and regulate the various definitions, assumptions and methods used in accounting across the globe. It is responsible for created a set of high-quality global accounting standards by bringing efficiency to the financial markets around the world. IFRS provides general guidance on how financial statements should be prepared and presented instead of rules. It is generally used in the European Union as well as 120 countries globally. International Financial Reporting Standards (IFRS)Ĭountries like the United Kingdom have adopted the International Financial Reporting Standards (IFRS). These requirements are issued by the Financial Accounting Standard Board (FASB). For instance, in the U.S the Securities and Exchange Commission (SEC) instruct companies to follow the GAAP requirements. There is no universal GAAP standard, instead, the specified principles and rules are adjusted to geographic locations or from one industry to another. The purpose of GAAP is to ensure the consistency, comparability and transparency of the financial reporting between the various financial information. GAAP combines both standards set by a set of policy board and the generally accepted ways of recording and reporting accounting information. Generally accepted accounting principles or GAAP, are a collection of followed accounting rules and standards for financial reporting.
What are Generally Accepted Accounting Principles (GAAP)?