ACCOUNTING PRINCIPLES

A ccounting principles is the rules and guidelines that companies must follow when reporting financial data. The common set of accounting principles is the generally accepted accounting principles (GAAP). To remain listed on many major stock exchanges in the U.S. companies must file regular financial statements reported according to GAAP. Accounting principles differ  around the world and countries usually have their own, slightly different, versions of GAAP.

Since accounting principles differ a cross the world, investors should be aware of these differences and account for them when comparing come panies in different countries. The problem of differences in accounting principles does not much affect mature markets. Still, investors should be careful, since is still leeway for the distortion of numbers under many sets of accounting principles.