#GAAP STANDS FOR FULL#

Disclosure: In the spirit of full disclosure, financial statements should include any necessary notes to fully explain the financial information provided.

Presentation: For its financial statements, a company should present an income statement, balance sheet, cash flow statement, and statement of shareholder's equity.Measurement: Financial statements should measure and present financial results in accordance with GAAP specifications.Recognition: Financial statements should accurately recognize all of a company's assets, liabilities, revenue, and expenses.In addition to these 10 primary principles, companies are expected to adhere to four additional principles to guarantee the integrity and consistency of their financial statements: Utmost good faithĪccountants and business managers should act in good faith by honestly recording transactions and collecting financial data. Anything that affects a company's financial standing is generally considered material, meaning that companies must provide full financial disclosure. MaterialityĪll material financial data and information should be disclosed. Periodicityįinancial data should be reported at regular intervals to allow for easy comparison among reporting periods and companies. If an accountant is required to make any assumptions, those assumptions should be based on historical precedents set by the business.

ContinuityĪccounting should be conducted based on the assumption that a company will continue to operate indefinitely. A prudent approach ensures that a company's financial performance is not overstated. PrudenceĪccountants should be prudent, or conservative, when deciding which accounting methods to use. A company's assets may exceed its debt, but its financial statements should report both its asset and liabilities separately. The value of a company's liabilities should not be 'compensated for' by the value of the company's assets. Establishing a permanent accounting method facilitates accurate comparison. Companies should always use the same methods across reporting periods as much as possible. Permanence of methodĭifferent but equally valid accounting methods are sometimes available. Accountants, despite being paid by the companies they are auditing, must prepare truthful and sincere financial statements. SincerityĪccurate and impartial accounting is imperative. A company should make sure that the applicable standards are consistently used throughout the company. The same accounting standards should be consistently applied for the entire accounting process. The accounting principles work with each other, so any deviation from reporting requirements on one part of a company's financial statement could cause other parts to be incorrect. RegularityĬompanies must follow, with regularity, all specific rules and regulations. What are the generally accepted accounting principles?Īuditors and internal accountants are required to follow these 10 generally accepted accounting principles: 1.

Gaap stands for