Understanding Generally Accepted Accounting Principles
A bachelor of science graduate in economics from St. Lawrence University, St. Louis resident James Giacin is a managing director at a financial firm in Missouri. He leads the company’s strategic initiatives in finance and asset management solutions for insurance companies. James Giacin’s responsibilities at the St. Louis company also cover compliance with national guidelines such as Generally Accepted Accounting Principles (GAAP).
GAAP refers to a standard set of accounting rules, procedures, and standards formulated by the Financial Accounting Standards Board (FASB). The purpose of GAAP is to streamline the communication of financial reporting and information for compatibility, comparability, and consistency regardless of the nature of the public company.
GAAP combines standards from policy boards and the commonly used methods of account recording and reporting and covers specific public company topics such as balance sheet classification, revenue, and materiality. Due to the standardization and consistency across different companies, investors and public auditors, especially from government agencies, can analyze and extract information on a company’s performance over a stated time and also compare it with similar entities for oversight and investment decisions.
Mandatory compliance with GAAP applies to all publicly traded companies in the United States, with regular filings of GAAP-compliant financial statements required by the Securities and Exchange Commission. A certified public accounting firm determines compliance through an external and independent audit.