What is US GAAP and why its important for your business?


What is US GAAP - Generally accepted accounting principles?


US GAAP- Generall accepted accounting principles are set of accounting standards/principles adopted by the professional accounting industry.

These accounting standards, rules are established, reviewed and managed by a non-profit private organization called FASB (Financial accounting standard board).


Why US GAAP is important for your business/corporation ? Both public and non-public

All companies have to publish financial reports. These financial reports provide the financial performance of your company to various stakeholders or other external organizations eg : Investors, banks, lending institutions, federal & state government agencies, and other stakeholders.

Without a standard process or set of rules, each company may adopt their own accounting standards or principles. This will inturn cause confusion to the public or other stakeholders in interpreting the financial information which may be crucial for their decision making process.

In the  best interest of the public and key stakeholders,   FASB Financial accounting and standards board establishes accounting standards.


Benefits of US GAAP for your business :

1) Builds trust : Following the right US GAAP accounting standards builds trust among the general public and key stakeholders.

2) Easily understandable : US GAAP makes it easily understandable for vendors, investors etc. It also helps breakdown complex financial numbers & helps accurately represent the true worth of the company.

3) Merger and acquisition deals, issuance of company stock, business sale : US GAAP makes it easier as key stake holders can review financial information easily during M& A deals etc.

4) Consistency : As the same set of principles are followed across companies, it promotes consistency and reliability.

5) Financial statement audits : A well managed company following US GAAP will result in a favorable financial statement audit report. This inturn helps increase the company's valuation, instills trust among stakeholders and help the company favorably in difficult economic conditions.

6) Bank Loans : As US GAAP is still preferred for most lending institutions and banks, it helps you with loan approval.


Important resources

Below are few important links that you may find it useful :


WIKI link to FASB

FASB link on Wikipedia


FASB -Financial accounting and standards board link


Posted In: Accounting

Go Back