What is GAAP ?
GAAP is a set of accounting standards and guidelines that companies in the United States are expected to follow when they prepare their financial statements. The acronym GAAP stands for Generally Accepted Accounting Principles.
Generally accepted accounting principles are financial reporting accounting principles that are widely used. The Securities and Exchange Commission of the United States has adopted these standards. The reporting requirements for a specific industry are included in these standards.
GAAP is not required for all businesses. The SEC expects regulated companies to adhere to GAAP in their financial reporting. The main agenda of GAAP is to standardize the method of reporting for easy comparison. This principle is established by the Financial Accounting Standards Board (FASB).
GAAP helps classify financial reporting for consistency and transparency in representation. Consistent financial reporting will help investors make future decisions. GAAP is mainly used by reporters in the United States and is rule-based, while other countries use IFRS (International Financial Reporting Standards) for the reporting of financial statements.
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Lenders generally place more emphasis on financial reporting as per GAAP in the market as it is more ethical and reliable. Nimblefincorp can help you to choose the right principle for your financial reporting requirements.
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