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What is GAAP the financial term discribing earnings?

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Wiki User
03/20/2009

GAAP is a financial term but it doesn't describe earnings. GAAP means Generally Accepted Accounting Principles, and they're the principles, standards and procedures companies use to prepare financial statements. By using GAAP, an investor can read a company's annual report with some confidence the company is counting its money in generally the same way the company across the street from it counts theirs. These go hand in hand with GAAS, the Generally Accepted Auditing Standards accountants use to ensure a company that's using Generally Accepted Accounting Principles is not exceeding their Generally Accepted Limits.