US GAAP

Also known as: Generally Accepted Accounting Principles; FASB ASC

framework · accounting · regulatory-standard

Body of accounting standards governing US financial reporting, codified in the FASB Accounting Standards Codification.

US Generally Accepted Accounting Principles is the body of accounting standards governing financial reporting by US public companies, private entities following GAAP, and not-for-profits. Standard-setting authority moved from the AICPA's Committee on Accounting Procedure (1939) to the Accounting Principles Board (1959) to the independent Financial Accounting Standards Board (FASB) in 1973, where it remains. In 2009 the FASB consolidated all extant pronouncements into the Accounting Standards Codification (ASC), which is now the single authoritative source of nongovernmental US GAAP. The SEC has statutory authority to set US GAAP for SEC registrants but has historically delegated this to FASB while retaining rulemaking and interpretive power. US GAAP is rules-based relative to IFRS and carries detailed industry-specific guidance.

Originators

AICPA Committee on Accounting Procedure (1939); Accounting Principles Board (1959); Financial Accounting Standards Board (1973 onward); SEC retains statutory authority high

Year / Decade

1939 (CAP origins); 1973 (FASB established); 2009 (ASC codification) high

Primary sources

FASB (2009 onward). FASB Accounting Standards Codification, AICPA (1939). Accounting Research Bulletins, Storey, R.K. & Storey, S. (1998). The Framework of Financial Accounting Concepts and Standards, FASB Special Report high

Core components

FASB Accounting Standards Codification (ASC) topics 100-995
Statements of Financial Accounting Standards (SFAS, pre-codification)
ASUs (Accounting Standards Updates)
Industry-specific topics (insurance, banking, real estate, software, etc.)
Hierarchy of authoritative GAAP
FASB-SEC interaction and SEC Staff Accounting Bulletins
Conceptual Framework underlying standard-setting

Primary use case

Financial reporting by US public companies registered with the SEC; GAAP-basis financial statements for private companies, lenders, and regulators; basis for audited financial statements under GAAS or PCAOB AS; input to tax provisioning, debt covenants, and financial analysis.

Common criticisms

Rules-based orientation produces voluminous guidance and bright-line tests that encourage structuring transactions to fall just outside scope
off-balance-sheet structures pre-2003 (Enron special-purpose entities) and lease accounting pre-ASC 842 illustrated the gameability problem
convergence with IFRS stalled after 2014 leaving major differences in revenue recognition mechanics, leases, financial instruments, and impairment that complicate global comparison
FASB's standard-setting process is criticized as slow and captured by large preparer constituencies
the cost-benefit analysis underlying new standards has been challenged as opaque (e.g., academic critique of ASC 606 implementation costs)
fair-value emphasis introduced procyclicality concerns during the 2008 financial crisis.

Lineage

Parent of: ASC 606, ASC 842, ASC 815, ASC 805
Siblings: IFRS, FASB Conceptual Framework, Statutory Accounting Principles, GASB, FASAB