GAAP = Generally Accepted Accounting Principles

What is GAAP

GAAP (Generally Accepted Accounting Principles) are the generally accepted accounting principles and rules that determine how companies should prepare and present their financial statements.
GAAP is used primarily in the United States and is maintained by the FASB (Financial Accounting Standards Board).

The main goals of GAAP

• To ensure clarity and comparability of financial statements across different firms.
• To provide investors and other stakeholders with reliable and consistent information.
• To minimize the possibility of accounting data manipulation.

The basic principles of GAAP

• Consistency principle — accounting methods should be applied uniformly over time.
• Relevance principle — financial information must be useful for decision-making.
• Reliability principle — data must be supported by credible evidence.
• Comparability principle — enabling comparison of financial results across companies.
• Completeness principle — inclusion of all relevant information.

Differences between GAAP and IFRS

• GAAP is a standard used mainly in the US, while IFRS (International Financial Reporting Standards) is a global standard.
• Some methodologies differ — for example, in inventory valuation, revenue recognition, or the treatment of leases.
• When analyzing stocks, it's important to know which standard the financial statements are prepared under.

GAAP on the Stonkee platform

On Stonkee, financial metrics for US companies such as EPS or ROE are calculated based on data reported under GAAP. AI also highlights differences between GAAP and non-GAAP results.

Summary

GAAP is a set of accounting rules that ensures consistency and transparency in financial reporting. It is essential for the accurate analysis of US companies and for comparing their results across the market.