Generally Accepted Accounting Principles

A common set of accounting principles, standards and procedures that companies must follow.

Generally accepted accounting principles, or GAAP, consist of not only authoritative standards set by policy boards, but also the commonly accepted methods of recording and reporting financial information. They establish how accounts and financial reports should be prepared.

What does GAAP mean in the UK?

You may have also heard of the acronym GAAP in reference to Generally Accepted Accounting Practice. UK GAAP is the body of accounting standards and other guidance published by the Financial Reporting Council (FRC). A new financial reporting framework took effect in the UK from 1st January 2015.

Practical Application Example

“ One of the developments of the new UK GAAP is a simpler accounting standard for ‘micro-entities’ – companies that satisfy at least two of the following conditions: annual turnover of less than £632,000, a balance sheet total of less than £316,000 and no more than 10 employees. This standard enables micro-entities to produce a simpler balance sheet and profit and loss account, for example, while they are also exempt from the need to produce a director’s report. ”