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GAAP
(Generally Accepted Accounting Principles)
GAAP (Generally Accepted Accounting Principles) is the U.S. accounting standard set by the FASB, ensuring consistency in financial statements (e.g., balance sheets, income statements). Required for SEC-filied public companies.
GAAP governs revenue recognition (e.g., accrual accounting), depreciation, and lease reporting. Contrasted with IFRS (global standard), GAAP is more rule-based (e.g., LIFO inventory allowed). Auditors check GAAP compliance; violations like misclassifying OPEX as CAPEX trigger SEC investigations. Startups switching to GAAP for IPOs often face complex adjustments to EBITDA calculations.
GAAP governs revenue recognition (e.g., accrual accounting), depreciation, and lease reporting. Contrasted with IFRS (global standard), GAAP is more rule-based (e.g., LIFO inventory allowed). Auditors check GAAP compliance; violations like misclassifying OPEX as CAPEX trigger SEC investigations. Startups switching to GAAP for IPOs often face complex adjustments to EBITDA calculations.