The GAAP is a set of accounting principles that accountants are required to follow as they go about preparing financial documents.
These principles are enforced by the SEC, a U.S. Government Agency, and are required for CPAs working in publicly traded companies to follow. While not required, private industries commonly adhere to the GAAP in good practice.
GAAP standards are not uniform between jurisdictions. However, they are commonly broken down into three major categories of compliance:
- General assumptions
- Constraints or restrictions
- Rules or principles
You can remember this by thinking of the clothing store, but with more Canada, since this one has another…eh.