We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Accounting

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is GAAP Law?

By C. Mitchell
Updated: May 16, 2024
Views: 7,591
References
Share

Most countries have a number of different laws and statutory provisions that pertain to generally accepted accounting principles, which are often collectively referred to as generally accepted accounting principle (GAAP) law. This title is often somewhat deceptive, as there is rarely but one law at play. Accounting laws are usually enforced more in the form of disparate mandates and enforcement actions than as any single black-letter application. The term “GAAP law” is nonetheless frequently used in a great many countries. It is normally understood to represent any of a range of corporate finance laws or statutory reporting provisions that mirror or emulate the principles mandated by financial regulators.

The idea behind any GAAP scheme is to introduce some sort of uniformity and accountability into financial record keeping. Without boundaries, companies and organizations would in all likelihood keep track of their sales, profits, and tax obligations in all manner of disparate ways. Many of these would be well intentioned, but none would likely to be consistent — and some could be downright deceptive. In most countries, generally accepted accounting principles act as financial fence posts within which corporations and other public organizations must work. They are usually set by government regulatory authorities or financial accountancy boards, and are almost always published as guidelines, all of which can be adopted in a variety of ways.

Laws that fall under the GAAP law categorization are generally authored by wholly separate entities and rarely adopt GAAP language directly. They are usually presented as financial regulations and general corporate finance laws. Statutes dictating ethical accounting, prohibiting fraud, and proscribing stock inflation are some of the most common examples. With few exceptions, companies that follow their jurisdiction’s generally accepted accounting principles will also comply with all GAAP laws.

GAAP law enforcement is usually somewhat different from regular GAAP enforcement. This means that a company that engages in deceptive or otherwise unsanctioned accounting can face penalties from multiple directions. Law enforcement is usually applied against specific individuals, such as corporate officers or executives. Policy enforcement, on the other hand, more often results in sanctions against the company as a whole.

The agents responsible for doling out these penalties are different, as well. Actual law, GAAP law or otherwise, is usually administered through a country’s justice system, with infractions being prosecuted by government lawyers. Straight GAAP violations are typically handled by the oversight agency that crafted the principles in the first place. The goal of enforcements in either account is to ensure that sound financial management techniques and, at times, financial management tools are being used by all entities uniformly.

Complexities arise most frequently for companies who engage in transnational business. Although most countries’ GAAP laws are similarly spirited, they are often framed and phrased very differently. Fully adhering to one set of accounting principles may be fine in country A, but may not be enough to satisfy the GAAP law of country B. Business finance management in these situations often requires a great deal of research, as well as a careful tailoring of all policies, provisions, and norms.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Discussion Comments
Share
https://www.smartcapitalmind.com/what-is-gaap-law.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.