What is GAAP?

GAAP, or Generally Accepted Accounting Principles, refers specifically to a framework of accounting standards that are used in financial reporting primarily in the United States. This framework provides a structure for financial reporting that ensures consistency and transparency across various companies and industries, enabling stakeholders to compare financial statements effectively.

This set of standards encompasses a range of accounting principles, rules, and conventions that organizations must adhere to when preparing financial statements. By following GAAP, businesses can provide reliable and comparable financial information to investors, creditors, and regulators, which is crucial for making informed economic decisions.

While there are international accounting standards, like IFRS (International Financial Reporting Standards), GAAP is distinct in its application mainly within the United States. It does not specifically relate to business taxation or investment analysis, as these areas involve different guidelines and considerations that do not fall under the purview of GAAP.