Accounting principles are the standards and practices applied in financial reporting, telling accountants what items to measure and when and how to measure them.  They are commonly thought of in terms of assumptions, constraints and principles.  The conventions, rules and procedures of accounting that must be followed in recording transactions and events and in preparing the financial statements for use outside of the firm are generally accepted accounting principles (GAAP).

GAAP Definition in Loan Market Association Facility Agreements
“GAAP” means generally accepted accounting principles in [       ]/[including IFRS].

GAAP comprise various assumptions, principles and constraints accountants follow in recording and summarizing transactions and events in the preparation of financial statements used in any given jurisdiction.  GAAP refers either to national accounting standards (local GAAP), such as US GAAP or German GAAP, or the International Financial Reporting Standards (IFRS).  US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS) are the two principal accounting frameworks that are used throughout the world.

Global Adoption of IFRS
Region % Requiring
IFRS
Europe 98%
Middle East 89%
Africa 79%
Asia and Oceania 75%
Americas 73%
Total 83%
Source: IFRS

Local GAAP and IFRS are based on accrual accounting.  By accounting for noncash assets and liabilities and any changes in them and by recognizing revenues, expenses, gains and losses, accrual accounting links a business’s operations and accounting events to future and past cash movements.

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