GAAP = Generally Accepted Accounting Practice

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Regulatory frameworks / Accounting standards

provide a foundation of how to translate an entity’s activities into a set of financial statements, on which users (all stakeholders eg investors, lenders, government, employees, suppliers and customers) can base their economic and investment decisions

GAAP ensures that financial statements are relevant, reliable, comparable and understandable


  • Financial statements (local and international) are more comparable, allowing investors to potentially invest abroad

Multinational companies are able to:

  • Attract foreign investments
  • Comply with the reporting requirements of foreign stock exchanges
  • Easily prepare group financial statements
  • Reduce audit costs
  • Easily transfer employees between different countries


  • Can exercise improved control over foreign multinationals operating in their country as the companies are less able to hide foreign accounting practices

Revenue authorities (tax)

  • Tax liabilities of investors are easier to calculate

Differing legal systems prevent the development of accounting practices
Countries have varying ideas of who the user groups are and their importance
Purpose of financial reporting differs in countries regarding tax assessments and investor decision making
Different needs of developing countries
Unusual circumstances can impact a company’s ability to prepare financial statements in accordance with IFFR standards

  • Development
  • Implantation
  • Enforcement of IFRS’s