Generally accepted accounting principles is defined as a widely accepted set of rules, conventions, standards, and procedures for reporting financial information. It actually encompasses the conventions, rules and procedures to define what is accepted accounting practice.
Generally accepted accounting principles (GAAP) are conventional – that is, they become generally accepted by agreement after tacit agreement rather than by formal derivation from a set of postulates and basic concepts. The principles have developed on the basis of experience, reason, custom, usage, and practical necessity.
Simply stated, generally accepted accounting principles represent the “rules, procedures, practice and standards followed in the preparation and presentation of financial statements.”
In the Philippines, the development of generally accepted accounting principles is formalized through the creation of the Accounting Standards Council. The accounting standards promulgated by the ASC constitute the generally accepted accounting principles in the Philippines.
That is why, it is not safe to say that IFRS substistutes Philippine GAAP. As a matter of fact, IFRS only constitutes GAAP. GAAP is broader than IFRS. GAAP is the foundation, the basic knowledge, the basic accepted rules and procedures, while IFRS is only one of the means of formalizing the GAAP.
In a much simpler sense, IFRS is but just one of the formalities of GAAP, and stands on the same ground as other accounting standards like the International Accounting Standards (IAS), FASB’s SFAS, PAS, etc.
In an auditor’s report,
“the financial statements referred to above present fairly…in accordance with generally accepted accounting principles….”