Crash Course in Accounting and Financial Statement Analysis, Second Edition

Generally Accepted Accounting Principles

In the United States, a governmental agency called the Securities and Exchange Commission (SEC) authorizes the Financial Accounting Standards Board (FASB) to determine U.S. accounting rules.

FASB communicates these rules through the issuance of Statements of Financial Accounting Standards (SFAS). These statements make up the body of U.S. accounting rules known as the Generally Accepted Accounting Principles (GAAP). These rules have been developed to provide guidelines for financial accounting in order to ensure that businesses present their financial information on a fair, consistent, and straightforward basis. Financial statements of U.S. companies must be prepared according to U.S. GAAP.