GAAP is an acronym that stands for Generally Accepted Accounting Principles. It is the set of rules that accountants and auditors use to maintain a responsible chain of coverage when examining a company's books to declare them to be a true and accurate representation of the company's financial health, but it has been altered over the years to be almost meaningless for the average Joe or Josie to understand.
The SEC has, after the Enron/Arthur Andersen debacle, been charged with making GAAP more stringent. Companies had been declaring profits and smaller losses then reality would dictate because they were "following the GAAP rules." Investors like you and I were left in the dark. Hopefully, that will be changing.
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