GAAP stands for Generally Accepted Accounting Principles

GAAP STANDS FOR GENERALLY ACCEPTED ACCOUNTING PRINCIPLES HOW TO

GAAP requires that fixed assets be stated at their cost, net of any accumulated depreciation. Both accounting frameworks allow for the use of first in, first out valuations, as well as weighted-average valuations. LIFO tends to result in unusually low levels of reported income, and does not reflect the actual flow of inventory in most cases, so the IFRS position is more theoretically correct. GAAP allows a company to use the last in, first out method of inventory valuation, while it is prohibited under IFRS. This conceptual difference breaks down in some areas, such as financial instruments, where IFRS is essentially rules-based. IFRS is principles based, so that general guidelines are set forth, and users are expected to use their best judgment in following the principles. The rules basis also results in very large standards, so that the text of GAAP is much larger than the text of IFRS. This results in some gaming of the system, as users create transactions that are intended to manipulate the rules in order to achieve better financial results.

GAAP STANDS FOR GENERALLY ACCEPTED ACCOUNTING PRINCIPLES HOW TO

GAAP is rules based, which means that it is full of very specific rules for how to treat a large number of transactions.

These differences include the items noted below. Though the organizations responsible for these two frameworks have engaged in talks to minimize the differences between the frameworks, there are still several significant differences. GAAP is primarily used in the United States, while IFRS has been adopted in most other countries. There are two major accounting frameworks in use in the world today, which are Generally Accepted Accounting Principles ( GAAP) and International Financial Reporting Standards ( IFRS).

GAAP stands for Generally Accepted Accounting Principles