GAAP, or Generally Accepted Accounting Principles, is a standardized set of rules and guidelines used in financial accounting and reporting. These principles ensure consistency, reliability, and transparency in how businesses prepare and present their financial statements. GAAP is especially important for investors, regulators, lenders, and other stakeholders who rely on accurate and comparable financial information.

In Canada, GAAP is closely aligned with International Financial Reporting Standards (IFRS) for publicly accountable enterprises, while private enterprises may follow Accounting Standards for Private Enterprises (ASPE).

GAAP encompasses a wide range of principles, including:

• Consistency: Applying the same accounting methods over time.

• Relevance and reliability: Ensuring financial information is useful and trustworthy.

• Full disclosure: Clearly presenting all necessary information in financial reports.

• Matching principle: Recording expenses in the same period as the revenues they help generate.

• Revenue recognition: Recording income when it is earned, not when cash is received.

Following GAAP is crucial for regulatory compliance and financial integrity. It also helps reduce errors and fraud by setting clear expectations for how transactions should be recorded.

In summary, GAAP provides the framework that supports fair and standardized financial reporting, enabling better decision-making and fostering trust in business performance.