when accounting principles allow a choice among multiple methods a company should apply the same accounting method over time or disclose the change in its accounting method in the footnotes of the financial statements 
generally accepted accounting principles gaap generally accepted accounting principles gaap are uniform accounting principles for private companies and nonprofits in the u s these principles are largely set by the financial accounting standards board fasb an independent nonprofit organization whose members are chosen by the financial accounting foundation 2a similar organization the governmental accounting standards board gasb is responsible for setting the gaap standards for local and state governments a third body the federal accounting standards advisory board fasab publishes the accounting principles for federal agencies 34although privately held companies are not required to abide by gaap publicly traded companies must file gaap compliant financial statements to be listed on a stock exchange chief officers of publicly traded companies and their independent auditors must certify that the financial statements and related notes were prepared in accordance with gaap 5privately held companies and nonprofit organizations also may be required by lenders or investors to file gaap compliant financial statements for example annual audited gaap financial statements are a common loan covenant required by most banking institutions therefore most companies and organizations in the u s comply with gaap even though it is not a legal requirement accounting principles differ around the world meaning that it s not always easy to compare the financial statements of companies from different countries international financial reporting standards ifrs the international accounting standards board iasb issues international financial reporting standards ifrs these standards are used in approximately 168 jurisdictions including those in the european union eu 1the securities and exchange commission sec the u s government agency responsible for protecting investors and maintaining order in the securities markets has expressed interest in transitioning to ifrs however because of the differences between the two standards the u s is unlikely to switch in the foreseeable future 5however the fasb and the iasb continue to work together to issue similar regulations on certain topics as accounting issues arise 6since accounting principles differ around the world investors should take caution when comparing the financial statements of companies from different countries the issue of differing accounting principles is less of a concern in more mature markets still caution should be used as there is still leeway for number distortion under many sets of accounting principles who sets accounting principles and standards various bodies are responsible for setting accounting standards in the united states generally accepted accounting principles gaap are regulated by the financial accounting standards board fasb in europe and elsewhere international financial reporting standards ifrs are established by the international accounting standards board iasb 