Which accounting framework is primarily used for financial reporting in the U.S.?

The primary accounting framework used for financial reporting in the U.S. is Generally Accepted Accounting Principles (GAAP). This set of accounting standards is established by the Financial Accounting Standards Board (FASB) and is designed to ensure consistency, transparency, and comparability in financial statements across various entities. GAAP encompasses a wide range of rules and guidelines that govern how financial transactions should be recorded and reported, making it crucial for companies to follow in their financial disclosures.

Adopting GAAP allows investors, creditors, and other stakeholders to understand and compare financial results reliably, which is essential for informed decision-making. In contrast, while the International Financial Reporting Standards (IFRS) serve a similar purpose globally, they are not the primary framework used within the U.S.

The Accounting Standards Codification (ASC) is actually a component of GAAP; it organizes U.S. GAAP into an accessible structure but does not independently represent a separate framework. Tax Basis Accounting relates specifically to tax reporting and does not meet the comprehensive standards required for external financial reporting. Hence, GAAP stands out as the framework that governs the preparation of financial statements in the United States.