Generally Accepted Accounting Principles and Reporting Standards

• Author: Vern Krishna
• Pages: 48-58

48 Understanding Financial Statements

Chapter III: Generally Accepted

Accounting Principles and

Reporting Standards

e phrase “generally accepted accounting principles” (GAAP) is

an intrinsic and fundamental component of nancial language. e

auditor’s report refers specically in its opinion to GAAP. e aud-

itor’s report for Duggan Inc, for example, states that the company’s

nancial statements for the years ended - and - were pre-

pared in accordance with Canadian generally accepted accounting

principles. Since  January , public companies must also report

using International Financial Reporting Standards (IFRS).

GAAP and IFRS refer to broad principles and conventions that

apply generally in accounting. ey also refer to specic rules to

determine accounting practices at particular times. In Canada, the

authoritative source of GAAP and IFRS is the Handbook of the

Canadian Institute of Chartered Accountants, which states (at para

.):

GAAPs encompass not only specic rules, practices and proce-

dures relating to particular circumstances but also broad prin-

ciples and conventions of general application.

However, GAAPs are not universal and identical. e United

States has its own set of GAAPs. e International Accounting

Standards Board (IASB) has other GAAPs. Canada has adopted

international GAAPs as articulated by the IASB, and known as

IFRS, for public companies.