What is the primary purpose of US GAAP?

The primary purpose of US Generally Accepted Accounting Principles (GAAP) is to standardize financial reporting for public companies. This framework is essential because it establishes a consistent set of rules and guidelines that all public companies must follow when preparing their financial statements. By having a uniform set of accounting standards, investors and stakeholders can reliably compare the financial performance of different companies within the same industry, fostering transparency and trust in the financial markets.

Standardization through GAAP helps ensure that financial statements are accurate and reflect the true financial position of a company, enhancing clarity and consistency. As a result, investors can make informed decisions based on comparable data, which contributes to the overall integrity and efficiency of the financial markets.

In contrast, while aspects like international trade, accounting for privately held companies, and flexibility in accounting practices are relevant in different contexts, they do not represent the core mission of US GAAP, which is firmly rooted in providing standardized reporting for public companies.