GAAP (U.S.) – rules-based approach

Regularity

Financial statements must follow GAAP; no ad-hoc methods.

Consistency

Use the same accounting procedures(steps) across periods; disclose and quantify any change.

Sincerity

Present a true, unbiased picture; avoid aggressive estimates or earnings management.

Permanence of Methods

Apply accounting methods consistently to preserve comparability.

Non-Compensation

Do not offset assets with liabilities or revenues with expenses unless GAAP permits it.

Prudence/Conservatism

When in doubt, avoid overstating assets or income; recognize probable losses promptly.

Continuity/Going Concern

Assume the entity will continue operating unless evidence shows otherwise; disclose doubt.

Periodicity

Report results for standard periods and match revenues/expenses to the proper period.

Full Disclosure

Provide all relevant information that could influence users’ decisions, often in the notes.

Utmost Good Faith

Assume honesty and completeness in transactions and reporting; internal controls support this.