The confusion around GAAP

In the USA, American accountants know the ten accounting principles known as GAAP, Generally Accepted Accounting Principles which are part of the rules set by the Financial Accounting Standards Board (FASB).

‘Generally accepted’ is an odd expression to use. They should be accepted totally but why only generally. What, I wonder, are the parts that are not accepted and who are the people who do not accept them? Some people, some of the time do not accept some of the principles.

I suspect that generally here means definitely. In which case, UAAP, as in Universally Accepted Accounting Principles or TAAP, as in Totally Accepted Accounting Principles would be more accurate. Even just AAP, Accepted Accounting Principles would be better. The mystery however remains unsolved, as American accountants never discuss this anomaly. The word generally in this context has become so familiar it now means fully accepted, not generally accepted.

In the UK GAAP is something completely different. They are not principles at all but a practice: Generally Accepted Accounting Practice. And to use the explanation of the Institute of Chartered Accountants in England and Wales, UK GAAP “is the body of accounting standards published by the UK’s Financial Reporting Council (FRC).” These standards are in turn based on EU-adopted IFRS.

GAAP in the UK is so familiar that in many documents written on this subject, accountants never explain what the letters mean: Generally Accepted Accounting Practice. And in the UK they follow their US colleagues and omit to explain why they use the term ‘generally accepted’ when they mean ‘fully accepted’.

So we have two GAAPs in two countries with different meanings. Non-accountants might find this is confusing but accountants in both countries don’t care. They know what their particular GAAP means and for them, only that matters. They don’t talk each other anyway.