US GAAP
Generally Accepted Accounting Principles (GAAP) are a common set of accounting rules, standards, and procedures issued by the FASB that US public companies must follow.
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Definition
Generally Accepted Accounting Principles (GAAP) are a common set of accounting rules, standards, and procedures issued by the FASB that US public companies must follow.
Use case
Used in accounting workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about US GAAP
US GAAP is rules-based and more detailed than IFRS. It governs how financial statements are prepared and presented. Key areas include revenue recognition (ASC 606), lease accounting (ASC 842), and fair value measurement (ASC 820). SEC-registered US companies must report using GAAP.
Example: Under GAAP ASC 606, a software company recognizes revenue when control of the product transfers to the customer. For a 3-year SaaS contract paid upfront, revenue is recognized ratably over the contract term, not all at once when cash is received.
Rank-ready answer
Definition, example, and interview framing
Generally Accepted Accounting Principles (GAAP) are a common set of accounting rules, standards, and procedures issued by the FASB that US public companies must follow.
Under GAAP ASC 606, a software company recognizes revenue when control of the product transfers to the customer. For a 3-year SaaS contract paid upfront, revenue is recognized ratably over the contract term, not all at once when cash is received.
In an interview, define US GAAP, explain where it appears in a real finance workflow, then name one assumption or limitation that a reviewer should check.
FAQ
Frequently Asked Questions
What is US GAAP?
Generally Accepted Accounting Principles (GAAP) are a common set of accounting rules, standards, and procedures issued by the FASB that US public companies must follow.
How is US GAAP used in finance?
US GAAP is rules-based and more detailed than IFRS. It governs how financial statements are prepared and presented. Key areas include revenue recognition (ASC 606), lease accounting (ASC 842), and fair value measurement (ASC 820). SEC-registered US companies must report using GAAP.
Can you give an example of US GAAP?
Under GAAP ASC 606, a software company recognizes revenue when control of the product transfers to the customer. For a 3-year SaaS contract paid upfront, revenue is recognized ratably over the contract term, not all at once when cash is received.