UK GAAP - What is the UK GAAP?
Definition: The UK Generally Accepted Accounting Practice is the body of accounting standards and other guidance published by the Accounting Standards Board.
UK GAAP - Generally Accepted Accounting Practice in the UK - is the overall body of regulation establishing how company accounts must be prepared in the United Kingdom. This includes both financial accounting standards as well as UK company law.
The UK GAAP body of accounting standards and other guidance is published by the UK Accounting Standards Board (ASB).
The abbreviation GAAP is also used as an abbreviation for similar terms used in other countries, such as Generally Accepted Accounting Principles, or Generally Accepted Accounting Policies.
The role of UK GAAP
Financial information is used by investors and creditors in order to make strategic decisions, and in order for them to do this they need to be able to compare financial information between different organizations. The body of standards known as generally accepted accounting practice (often abbreviated as GAAP, and pronounced gap) sets broad, as well as specific, rules that companies should follow when measuring and reporting their financial information.
This provides for consistency in the reporting of companies and businesses so that investors, creditors and the authorities can view financial statements from different companies that all follow the same rules and reporting procedures.
For example, if Company X reports £2,000,000 of revenue using GAAP, then that revenue can be compared to another Company Y that is reporting £1,000,000 of revenue using GAAP.
The Accounting Standards Board
The accounting standards laid out in UK GAAP are derived from numerous sources, but of the highest standard-setting authority is the UK Accounting Standards Board (ASB).
The ASB issues the Financial Reporting Standards (FRS). In order to enact new standards, the ASB has a formal exposure process for new proposals. Initially a Financial Reporting Exposure Draft (FRED) is released for comment, and new standards are only released in final draft when comments have been incorporated or addressed.