Legal & Compliance
GAAP
Generally Accepted Accounting Principles — the standard accounting framework required for audited financial statements in the US.
GAAP (Generally Accepted Accounting Principles) is the standardized accounting framework mandated by the SEC for US public companies and commonly used by private companies for audited financial reporting. For VC-backed startups, GAAP becomes important as they grow and approach institutional investment — large Series B/C investors and growth equity investors often require GAAP-compliant audited financials. Key GAAP concepts relevant to startups: revenue recognition (ASC 606 — when can you recognize SaaS revenue), stock-based compensation (ASC 718 — options and RSUs must be expensed), and fair value measurements (ASC 820 — how VCs mark portfolio investments). GAAP metrics often differ significantly from non-GAAP metrics that companies use to communicate with investors (excluding stock compensation, restructuring charges, etc.).