Generally Accepted Accounting Principles (GAAP) is the name given to the common set of standards and procedures used to compile financial statements that have been developed by the accounting profession. These standards are generally accepted and universally practiced for transparent and comparable general-purpose financial statements.
“Corporations wishing to issue debt or equity securities in a given country are typically subject to its financial reporting standards and legal requirements. For Example, foreign companies that wish to issue stock on the New York Stock Exchange are subject to SEC reporting requirements and are generally expected to follow, or reconcile their financial reporting to, U.S. GAAP. U.S. corporations face similar requirements overseas. The need to prepare different financial statements for different countries results in additional expense and in many cases, a lack of comparability.” (Titard, Di Gregorio, 2003) It is mainly these two problems that GAAP overcomes for an international company.
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