Generally accepted accounting principles (GAAP) differ from International Accounting Standards Board (IASB) accounting standards and financial reporting standards in that they tend to be set by the financial regulator of each jurisdiction for use by reporting entities preparing accounts within it that are not subject to IASB requirements.
Generally accepted accounting principles can vary widely in their scope and requirements. In some jurisdictions (such as the UK) they are akin to IASB standards in many ways, but this is by no means the universal case. As such there remain widespread differences between the accounting standards in use in many jurisdictions.
This is a particular problem when IASB standards are used to prepare the accounts of a parent company but local GAAP is used to prepare the accounts of its subsidiaries in each location in which it might operate, meaning that there is frequently both incompatibility between those accounts and an opportunity for the companies in question to arbitrage the difference in accounting standards to inflate or suppress the reporting of profits and liabilities, as they wish.
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