Generally Accepted Accounting Principles (GAAP) is primarily used in the United States, mandated for public companies by the SEC and maintained by the Financial Accounting Standards Board (FASB). While various countries have their own local GAAP (e.g., UK GAAP, Japanese GAAP), these are distinct, localized standards. The vast majority of the world uses International Financial Reporting Standards (IFRS).
U.S. Generally Accepted Accounting Principles (GAAP) is only used in the United States. GAAP is established by the Financial Accounting Standards Board (FASB).
Since GAAP is primarily only used within the United States, the IFRS standards have a much wider scope. Several countries have their own accounting standards.
GAAP stands for Generally Accepted Accounting Practice in the UK and Generally Accepted Accounting Principles in the US, although the meaning is broadly the same.
GAAP and IFRS define global accounting norms: GAAP is U.S.-specific and rules-based, while IFRS is principles-based and adopted by 167 countries worldwide.
Their subsidiaries in other countries have to follow the local standards – such as the China GAAP (Generally Accepted Accounting Principles) – while at the same time also preparing a financial statement that suit the requirements of HGB, so that a consolidated statement for the holding company can be produced.
GAAP is used mainly in the U.S., while most other countries follow the international financial reporting standards (IFRS). GAAP is also used by states and other government entities in the U.S. to prepare their financial statements.
The generally accepted accounting principles (GAAP) and the international financial reporting standards (IFRS) are the two dominant accounting framework used globally. While the United States follows GAAP, most European countries have transition to IFRS to promote financial harmonization.
All publicly-traded companies are required to use GAAP for accounting. While they can complement it with non-GAAP measures, their financial statements must be in accordance with GAAP. However, private companies are not required to use GAAP financial reports.
GAAP is primarily used in the U.S., while many other countries follow International Financial Reporting Standards (IFRS). In India, most companies use Indian GAAP for their accounting records.
Financial Accounting Standards Board
The FASB, which has its own staff, is overseen by the private nonprofit Financial Accounting Foundation (FAF). The FASB manages and updates GAAP.
Can I still use GAAP in Canada? Private enterprises are still able to use the private enterprises GAAP, while all publicly accountable enterprises are required to use IFRS standards. Not-for-profits and other private enterprises can choose separately developed standards for those entities.
It is one of the four sets of accounting standards listed companies in Japan can currently choose from to use to file their consolidated financial statements. The other three accounting standards are Designated IFRS, US-GAAP and Japan's Modified International Standards (JMIS).
GAAP can be expensive for companies lacking robust accounting infrastructure to implement and maintain. The need for specialized staff, auditing services, and continuous training to remain up-to-date with evolving standards can significantly strain financial resources.
At the national level, French GAAP (Generally Accepted Accounting Principles), also known as PCG (Plan Comptable Général), applies. Drawn up by the Autorité des Normes Comptables (ANC), this regulation creates an accounting framework that all companies domiciled in France must comply with.
Accountants use the following 12 principles as guidelines for recording and organizing financial data properly:
GAAP is not law, though violating GAAP can have costly ramifications. Errors and omissions can impact a company's credibility with lenders, investors, and other parties who rely on financial statements for an accurate picture of a company's finances.
For most of the world, accountants follow the IFRS rules. In the United States, the leading standard is called GAAP. Although there have been some discussions of transitioning the U.S. to the IFRS standard, there is little likelihood of that happening in the near future.
On the one side, the German Generally Accepted Accounting Principles (German GAAP) are primarily codified in the German Commercial Code (Handelsgesetzbuch or HGB) and are used by all legal entities in their single financial statements.
IFRS offers broader international adoption and flexibility, while US GAAP provides strict, detailed rules—useful in highly regulated environments.
Italian companies generally follow the Italian GAAP (OIC) for statutory reporting. Listed companies and large groups must use IFRS as adopted by the EU. The choice of standards depends on company type, size, and listing status.
There are four fundamental accounting assumptions that form the foundation of financial statement preparation. These are: economic entity, going concern, monetary unit, and periodicity.
Students may find GAAP difficult to learn at first. GAAP includes many complex principles that require deep, technical accounting knowledge. However, you can master GAAP with diligence, persistence, and hard work.