generally accepted accounting principles (GAAP)

Definition

Authoritative rules, practices, and conventions meant to provide both broad guidelines and detailed procedures for preparing financial statements and handling specific accounting situations. They provide objective standards for judging and comparing financial data and its presentation, and limit the directors' freedom in showing an unrealistic picture through creative accounting. An auditor must certify that the provisions of GAAP have been followed in reporting an organization's financial data in order it to be accepted by investors, lenders, and tax authorities. Most large countries (Canada, India, Japan, UK, US, etc.) have their own GAAP which may differ from those of others in minor or major details. See also accounting concepts.