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GAAP

GAP /ɡæp/

nounC1GRETOEFLIELTS

formalbusiness

Generally Accepted Accounting Principles; a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB).

GAAP is not a single rule but a comprehensive framework of accounting standards used in the United States. It ensures consistency, comparability, and transparency in financial reporting, making it easier for investors and creditors to understand financial statements.

The story behind the word. GAAP is an acronym for 'Generally Accepted Accounting Principles.' It's not a word with a deep ancient root but rather a modern construct, a shorthand for the comprehensive set of rules and guidelines that govern financial reporting in the United States. Think of it as the 'rulebook' for accountants!

Word relationships

accounting standards: Broader term; GAAP is a specific set of accounting standards.

Commonly confused with

IFRS (International Financial Reporting Standards): GAAP is the accounting standard used in the US, while IFRS is a global standard used in many other countries. They have significant differences.

Collocations

adhere to GAAP
comply with GAAP
GAAP standards
GAAP-compliant

Example sentences

"All publicly traded companies in the United States must prepare their financial statements in accordance with GAAP to ensure transparency for investors." Companies adhering to GAAP.
"The auditor's report confirmed that the company's financial records were free from material misstatement and conformed to GAAP." Auditors and GAAP.
"For multinational corporations, understanding the differences between GAAP and International Financial Reporting Standards (IFRS) is crucial." GAAP vs. IFRS.

Memory hook

GAAP helps you GAP the distance to good accounting practices. Accounting rulebook

When not to use

GAAP is specific to US accounting standards; other countries use different frameworks (e.g., IFRS). Don't use it as a generic term for 'good accounting practice' globally.

Fun facts

GAAP is a principles-based system, meaning it relies on broad principles rather than strict rules, allowing for some professional judgment.
The Financial Accounting Standards Board (FASB) is the primary organization responsible for establishing and updating GAAP in the U.S.

Related words

financial statement, compliance, audit

Explore more words

transparency, rubric, standardized, account