What is the primary goal of U.S. GAAP?

The primary goal of U.S. GAAP (Generally Accepted Accounting Principles) is to ensure that financial statements are understandable, reliable, and comparable across different organizations. This framework is designed to provide consistency in financial reporting, so users of financial statements can easily comprehend and interpret the data presented. Understandability is crucial as it enables investors, regulators, and other stakeholders to make informed decisions based on the financial health and performance of companies.

In addition, the principles of U.S. GAAP promote transparency and consistency, thereby enhancing the credibility of financial reports. When financial statements adhere to established standards, it reduces the complexity involved in analyzing financial data, further promoting an effective capital market.

While preventing fraud in financial reporting is an essential objective, it is more of an outcome of following good accounting practices rather than the primary goal of GAAP itself. Similarly, standardizing payroll procedures and promoting shareholder investments are not central to U.S. GAAP's primary objectives. Instead, they pertain to broader considerations of corporate governance and operational management.