Generally Accepted Accounting Principles (GAAP)
Updated on March 9, 2023
Financial statements in India are prepared on the basis of accounting standards issued by the Institute of Chartered Accountants of India (ICAI) as per provisions and guidelines laid by the Companies Act 2013. Similarly, all the public companies in the US follow GAAP (Generally Accepted Accounting Principles) which lays out the common set of accounting rules, standards, and procedures for companies to follow while preparing their accounting statements.
GAAP is more of a rules-based system of standards and is different from IFRS, (International Financial Reporting Standards) which is considered to be more robust, practical and international in nature and applicability.
The ten principles or concepts on which GAAP is based are:
Principle of Consistency
Principle of Regularity
Principle of Sincerity
Principle of Permanence of Method
Principle of Prudence
Principle of Continuity
Principle of Materiality
Principle of Periodicity
Principle of Non-compensation
Principle of Good Faith