Generally accepted accounting principles (GAAP) refer to a common set of

accounting rules, standards, and procedures issued by the Financial

Accounting Standards Board (FASB).

 GAAP aims to improve the clarity, consistency, and comparability of

the communication of financial information.
 GAAP is used mainly in the U.S., while most other jurisdictions use
the IFRS standards.
 The 10 Key Principles of GAAP
 There are 10 general concepts that lay out the main mission of
GAAP.2
 1. Principle of Regularity
 The accountant has adhered to GAAP rules and regulations as a
standard.
 2. Principle of Consistency
 Accountants commit to applying the same standards throughout the
reporting process, from one period to the next, to ensure financial
comparability between periods. Accountants are expected to fully
disclose and explain the reasons behind any changed or updated
standards in the footnotes to the financial statements.
 3. Principle of Sincerity
 The accountant strives to provide an accurate and impartial
depiction of a company’s financial situation.
 4. Principle of Permanence of Methods
 The procedures used in financial reporting should be consistent,
allowing a comparison of the company's financial information.
 5. Principle of Non-Compensation
 Both negatives and positives should be reported with full
transparency and without the expectation of debt compensation.
 6. Principle of Prudence
 This refers to emphasizing fact-based financial data representation
that is not clouded by speculation.
 7. Principle of Continuity
 While valuing assets, it should be assumed the business will
continue to operate.
 8. Principle of Periodicity
 Entries should be distributed across the appropriate periods of time.
For example, revenue should be reported in its relevant accounting
period.
 9. Principle of Materiality
 Accountants must strive to fully disclose all financial data and
accounting information in financial reports.
 10. Principle of Utmost Good Faith
  Derived from the Latin phrase uberrimae fidei used within the
insurance industry. It presupposes that parties remain honest in all
transactions.

Where Are Generally Accepted Accounting Principles

(GAAP) Used?
GAAP is a set of procedures and guidelines used by companies to prepare
their financial statements and other accounting disclosures. The standards
are prepared by the Financial Accounting Standards Board (FASB), which
is an independent non-profit organization. The purpose of GAAP standards
is to help ensure that the financial information provided to investors and
regulators is accurate, reliable, and consistent with one another.

Why Is GAAP Important?

GAAP is important because it helps maintain trust in the financial markets.
If not for GAAP, investors would be more reluctant to trust the information
presented to them by companies because they would have less
confidence in its integrity. Without that trust, we might see fewer
transactions, potentially leading to higher transaction costs and a less
robust economy. GAAP also helps investors analyze companies by
making it easier to perform “apples to apples” comparisons between one
company and another.

Evaluating Banking Performance – ROE Model – CAMEL Rating-GAAP Probability Analysis- Balance
Score Card-Asset Liability Management- Non Performing Assests (NPA) – BASEL Norms. CIBIL Rating,
Know Your Customer (KYC) Norms and Anti Money Laundering Act.
Gap Analysis The technique used by banks to analyze the impact of interest rate changes on the
assets, liabilities and net worth. Gap is the difference between rate sensitive asset and rate sensitive
liabilities. A negative gap is associated with increase in interest rates and a positive gap is associated
with decline in interest rates. Estimated loss is computed with reference to value change within each
time bucket and aggregate difference between assets and liabilities. Liabilities Assets Rate Sensitive
Liabilities Rate Sensitive Assets Fixed Rate Liabilities Fixed Rate Assets Total Total A positive funds
gap shows financing of rate sensitive assets by fixed rate liabilities. A negative funds gap on the other
hand shows fixed rate assets financed by rate sensitive liabilities. Example Liabilities Assets Rate
Sensitive Liabilities Rate Sensitive Assets Short term deposits 550000 Advances 14500

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