Generally Accepted Accounting Principles (GAAP)
The standardized accounting rules that governments follow when preparing financial statements, as promulgated by the Governmental Accounting Standards Board (GASB).
How It Works
Government GAAP differs from private-sector GAAP (set by FASB) in several important ways. Government accounting uses fund-based reporting, recognizes revenues when measurable and available (not when earned), and has specific rules for infrastructure assets, pension obligations, and tax revenue. Not all cities follow GAAP — some smaller cities use cash-basis accounting, which can obscure the true financial picture.
Related Terms
- Governmental Accounting Standards Board (GASB) — The independent organization that sets accounting and financial reporting standards for U.S. state and local governments.
- Comprehensive Annual Financial Report (CAFR/ACFR) — A city's official annual financial report, audited by independent accountants, containing detailed financial statements, statistical data, and management discussion.
- Modified Accrual Accounting — The accounting method used for governmental funds (like the general fund), where revenues are recognized when measurable and available, and expenditures are recognized when the liability is incurred.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.