What is the difference between GAAP and Statutory Accounting? - ProProfs Discuss
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What is the difference between GAAP and Statutory Accounting?

Asked by R. Jones, Last updated: Jul 01, 2022

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E. Barnes

E. Barnes

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E. Barnes
E. Barnes, Professional Gamer, Professional Gamer, Washington

Answered Apr 14, 2020

Statutory Accounting Principles is also referred to as SAP, which is its abbreviation. SAP is used in the preparation of financial statements of insurance companies. In the U.S, the authorized insurers are expected to prepare their financial information in accordance with SAP. These principles are basically designed for insurance departments in different states to aid the regulation of the solvency of the insurance companies.

While on the other hand, GAPP stands for Generally Accepted Accounting Principles, which provides accounting standards rules and procedures that have a common set and are defined by professional bodies in the accountancy sector. Most of the publicly traded company that is in the United States has adopted the GAAP.

These principles have provided authoritative accounting standards and also some commonly accepted methods of recording and reporting the accounting transactions. Companies are expected to follow the GAAP so as to take their investors to the confidence that use the financial information of their company for investment purposes.

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