UNIT 6: GAAP

GAAP is short for (0)………………………………………………….. GAAP is a

cluster of (1)………………………..and common industry usage that have been
developed over many years. It is used by organizations to:

• Properly organize their financial information into (2)…………………….

• Summarize the accounting records into (3)………………………. and
• Disclose certain supporting information.

One of the reasons for using GAAP is so that anyone reading the financial
statements of multiple companies has a (4)………………..for comparison, since
all companies using GAAP have created their financial statements using the same
set of rules. GAAP covers a broad array of topics, including:

• Financial statement presentation

• Assets
• (5)………………..
• (6)…………………..
• (7)………………
• Expenses
• Business combinations
• Fair value
• Foreign currency
• (8)……………………….
• Subsequent events
• Industry-specific accounting, such as airlines, (9)……………….., and health
care

The industry-specific accounting that is allowed or required under GAAP may vary
substantially from the more generic standards for certain accounting transactions.

GAAP is used primarily by businesses reporting their financial results in the

United States. (10)…………………………………………, or IFRS, is the
accounting framework used in most other countries. GAAP is much more
(11)……………….than IFRS. IFRS focuses more on general principles than
GAAP, which makes the IFRS body of work much smaller, cleaner, and easier to
understand than GAAP. Since IFRS is still being constructed, GAAP is considered
to be the (12)…………………………..accounting framework.