What is the (General Accepted Accounting Principles) Taxonomy?
GAAP is an acronym for Generally Accepted Accounting Principles, the standard accounting recording and reporting procedures used to compile financial statements to meet U.S. industry standards and regulations. The US GAAP aims to ensure consistency in financial reporting so that investors can better assess financial statements for investment purposes.
Through complex guidelines, GAAP sets out rules covering the fine details of financial statements, from balance sheet classification to revenue recognition. These guidelines are codified in the GAAP Taxonomy Architecture, which serves as the basis for XBRL.
Some financial accounting inconsistencies remain, however. Although U.S. companies follow GAAP rules, other countries apply London-based International Financial Reporting Standards (IFRS). This gap in standards affects global business practices, from accounting to stock market valuations.
Efforts are currently underway by the Securities and Exchange Commission (SEC) to adopt IFRS standards and resolve conflicts and confusion in international financial reporting in cooperation with the International Accounting Standards Board (IASB). For support and information, explore resources here.