The Importance of Generally Accepted Accounting Principles (GAAP)

About GAAP

Financial reporting (balance sheets, profit and loss statements, financial notes, and disclosures) is the language we use to communicate information about the financial condition of a company, a not-for-profit, or a state or local government. Generally Accepted Accounting Principles (GAAP) are the guidelines—the grammar and the punctuation—that determine how that language is written.
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GAAP & Private Companies

Many private companies, especially those seeking to expand their business and/or considering going public, make the decision to use GAAP-based financial reporting. Because of the credibility provided by GAAP reporting, private companies may realize greater flexibility in the types of capital available to them and in the number of investors willing to provide it.
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GAAP & Not-for-Profits

Not-for-profit organizations often find that there are many advantages to using GAAP—especially those seeking to expand their capacity to provide services. Not-for-profit financial statements that follow GAAP also promote understandability from a user perspective, and are commonly understood by lenders, donors, grantors, rating agencies, accrediting bodies, and regulators.
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  • About GAAP
  • GAAP & Private Companies
  • GAAP & Not-for-Profits

GAAP & Public Companies



Capital markets depend on companies being able to supply the market with high-quality financial information to enable investors to make better decisions.
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GAAP & Private Companies



Many private companies, especially those seeking to expand their business and/or considering going public, make the decision to use GAAP-based financial reporting.
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GAAP & State and Local Governments



Preparing a financial report in compliance with GAAP establishes greater accountability and transparency between a state or local government and its citizens, legislative and oversight bodies, investors, and creditors.
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GAAP & Not-for-Profits



Not-for-profit financial statements that follow GAAP promote understandability from a user perspective, and are commonly understood by lenders, donors, grantors, rating agencies, accrediting bodies, and regulators.
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Simplifying
and Improving GAAP



Investors and users have said that unduly complex financial reports obscure important information they need to make sound decisions. Preparers and governments say that complicated, unclear standards are difficult and expensive to apply.
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About GAAP



Financial reporting (balance sheets, profit and loss statements, financial notes, and disclosures) is the language we use to communicate information about the financial condition of a company, a not-for-profit, or a state or local government.
>> More


GAAP Related Videos

Interview series highlighting the importance of GAAP from the perspective of experts.



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