Business Definition for: Generally Accepted

Accounting Principles (GAAP)

Generally Accepted Accounting Principles (GAAP)
standards, conventions, and rules accountants follow in recording and summarizing transactions,
and in the preparation of financial statements. GAAP derive, in order of importance, from: (1)
issuances from an authoritative body designated by the AICPA Council (for example, the FASB
Statements, AICPA APB Opinions, and AICPA Accounting Research Bulletins); (2) other
AICPA issuances such as AICPA Industry Guides; (3) industry practice; and (4) accounting
literature in the form of books and articles. Principles also derive from tradition, such as the
concept of matching. In the audit report, the CPA must indicate that the client has followed
GAAP on a consistent basis.
Finance term
Generally Accepted Accounting Principles (GAAP)
conventions, rules, and procedures that define accepted accounting practice, including broad
guidelines as well as detailed procedures. The basic doctrine was set forth by the Accounting
Principles Board of the American Institute of Certified Public Accountants, which was
superseded in 1973 by the FASB (financial accounting standard board), an independent self-
regulatory organization.
Banking term
Generally Accepted Accounting Principles (GAAP)
accounting rules and conventions defining acceptable practices in preparing financial statements.
The FASB (financial accounting standard board) , an independent self-regulatory organization, is
the primary source of accounting rules followed by auditors and certified public accountants. The
aim of GAAP accounting principles is uniformity in financial statements.
Business term
Generally Accepted Accounting Principles (GAAP)
conventions, rules, and procedures that define accepted accounting practice, including broad
guidelines as well as detailed procedures.
Insurance term
Generally Accepted Accounting Principles (GAAP)
type of accounting method, in life insurance, designed to match revenues and expenses of an
insurer according to principles designed by the Financial Accounting Standards Board and the
Audit Guide for Stock Life Insurance Companies published by the American Institute of CPAs.
For example, under GAAP, acquisition expenses (costs of placing insurance on a company's
books such as administrative expenses and agent commissions) are recognized in the same
proportion that premium income is recognized over the premium paying period, with losses
subtracted from premium and investment income as they occur.
Real estate
Generally Accepted Accounting Principles (GAAP)
the set of rules considered standard and acceptable by Certified Public Accountants.
Example: Accounting deductions are required for real estate depreciation, even for assets that
rise in value.
Related Terms:
Dictionary of Business Terms
FASB (financial accounting standard board)
nongovernmental body with the authority to promulgate Generally Accepted Accounting
Principles (GAAP) and reporting practices. These are published in the form of FASB Statements.
Practicing CPAs are required to follow the FASB pronouncements in their accounting and
financial reporting functions. The FASB is independent of other companies and professional
organizations. The american institute of certified public accountants (AICPA) and the Securities
and Exchange Commission (SEC) officially recognize the Statements issued by he Financial
Accounting Standards Board. The FASB was established in 1973 to succeed the Accounting
Principles Board (APB).