If you decide to invest in stocks or bonds, then you should pay attention to the performance indicators of the respective companies. Issuers periodically publish data in the form of reports. Reporting can be published according to different standards, one of which is GAAP.
What it is
GAAP is a transliteration (transmission in Russian letters) of the English-language abbreviation GAAP. The abbreviation stands for Generally accepted accounting principles, translated from English - "generally accepted accounting principles." Occasionally you will come across a variant of "GAAP" - this is the same as GAAP.
The concept itself denotes the accounting rules adopted as a standard in a particular national economy. That is, different countries have their own GAAPs.
To denote the reporting standards of a particular state, abbreviations of countries are written before the GAAP abbreviation. So, UK GAAP is the reporting standards adopted in the UK. In the United States, US GAAP accounts.
In addition to the accounting principles of different countries, there is also a common global standard - IFRS. The interpretation of this abbreviation is "International Financial Reporting Standards".
US GAAP
Very often, when people talk about GAAP, they mean US GAAP. American accounting rules are recognized worldwide as the highest standard. The US dollar is the reporting currency for us gaap.
US GAAP is sometimes used in other countries as well. In the 2000s, this form of reporting was actively used by large Russian companies (along with Russian standards). The following main reasons prompted them to do this:
- the results of the company's activities are more understandable to analysts and investors from different countries;
- the company's performance is easier to compare with the results of their foreign (especially American) competitors;
- in US GAAP, the industry-specific features of reporting for a number of key areas of the economy are detailed. For this reason, such standards have been widely used by companies in the oil and gas and telecommunications sectors.
Today the majority of Russian players on the global market prefer to use IFRS. However, reporting under US standards remains relevant for corporations that place securities on the US financial markets.
Russian standards
Russian standards may be designated RUS GAAP. But in fact in the Russian Federation they are usually called "RAS" - "Russian Accounting Standards". The main features of such reporting:
- the report is intended primarily for supervising and controlling government agencies;
- indicators are given in Russian rubles;
- does not take into account the indicators of subsidiaries;
- great importance is attached to the formal side. The reporting forms are approved by the Ministry of Finance and are mandatory for everyone; there is a single chart of accounts;
- the reporting period coincides with the calendar year (quarter, half year).
International standards
The largest Russian companies, as a rule, also report in accordance with RAS and IFRS (ifrs). As in the case of US GAAP reporting, IFRS makes the company's business more transparent for international investors and financial institutions, analysts.
IFRS is not mandatory in Russia. But reports on these standards are prepared by companies that raise money abroad and / or actively work with foreign partners. These are, for example, Gazprom, Rosneft and many other well-known public joint stock companies.
Features of IFRS:
- reporting is addressed mainly to investors, shareholders and financial institutions;
- priority is given to the economic content of the report, and the legal form is secondary;
- IFRS allows you to prepare consolidated statements for the entire group of companies. That is, the parent company, its "daughters" and "granddaughters" act as a single whole. Because of this, similar indicators under RAS and IFRS may differ quite significantly;
- the reporting currency does not always coincide with the national currency. Typically, the currency in which the company makes a profit is used;
- there are no approved reporting forms, there are recommendations on the structure and minimum content of the report. There is no single chart of accounts;
- the financial year may not be the same as the calendar year.
In general, it is believed that IFRS allows you to better judge the state of affairs in a company than a report under RAS.