GAAP (Generally Accepted Accounting Practice)

Generally Accepted Accounting Practice (GAAP) is the term used to describe the basis on which financial reports are normally prepared. The term encompasses:
(a) specific rules, practices, and procedures relating to particular circumstances; and
(b) broad concepts and principles of general application

Financial reporting standards are the primary indicators of generally accepted accounting practice. Conformity with generally accepted accounting practice means:
(a) compliance with all financial reporting standards applicable to the entity; and
(b) in relation to matters for which no provision is made in financial reporting standards and that are not subject to any applicable rule of law, adopting accounting policies that:
(i) are appropriate to the circumstances of the entity; and
(ii) have authoritative support within the accounting profession in New Zealand.

(Source: Institute of Chartered Accountants of New Zealand, Explanatory Forward to General Purpose Financial Reporting, 1995)

GAAP also has a specific legal meaning and is defined in the Financial Reporting Act 1993. Entities subject to the Financial Reporting Act must comply with GAAP as defined in this Act.