GAAP (Generally Accepted Accounting Principles)

GAAP is an acronym for generally accepted accounting principles. The generally accepted accounting principles are a set of accounting rules, standards, and procedures set forth by the Financial Accounting Standards Board (FASB). The GAAP is outlined according to 10 principles: regularity, consistency, sincerity, permanence, noncompensation, prudence, periodicity, materiality, and good faith. The main goal of the GAAP is to ensure that a company’s financial statements are complete, consistent, and comparable. However, with the exception of the U.S., most countries use the International Financial Reporting Standards to exemplify accounting best practices. Publicly traded companies must adhere to the GAAP, but most companies do as well to gain a clear understanding of their financial health.