Generally Accepted Accounting Principles
A term to know.
This phrase refers to a common set of accepted accounting principles, standards, and procedures that companies and their accountants adhere to in issuing financial statements. GAAP is meant to ensure a minimum level of consistency in a company's financial statements, and also to facilitate the comparison of financial information across different companies.
GAAP is a compilation of principles that public accountants should use in preparing financial statements. At the top of the hierarchy of principles are statements by FASB and opinions by the AICPA, followed by FASB Technical Bulletins and AICPA Industry Audit and Accounting Guides and Statements of Position. The third level consists of AICPA Accounting Standards Executive Committee Practice Bulletins and positions of the FASB Emerging Issues Task Force (EITF). Also included are Topics discussed in Appendix D of EITF Abstracts. On the lowest level are FASB implementation guides, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB. Also included are practices that are widely recognized.