Which of the following is NOT a characteristic of GAAP?

• A. Consistency in financial reporting
• B. Flexibility in interpretations
• C. Transparency for users of financial statements
• D. Reliability of reporting

Answer: (B)

Flexibility in interpretations is the characteristic that is not consistent with Generally Accepted Accounting Principles (GAAP). GAAP is designed to create uniformity and consistency in financial reporting, ensuring that financial statements are comparable across different organizations and time periods. This consistency is critical for users, such as investors and regulators, who rely on accurate and reliable financial information to make informed decisions.

The primary goal of GAAP is to promote transparency, reliability, and comparability in financial reporting. This is achieved through strict standards and guidelines that dictate how financial transactions should be recorded, summarized, and presented. In this framework, flexibility in interpretations could lead to discrepancies and confusion, making it difficult for users to assess the financial health of an entity accurately. Therefore, maintaining a rigid adherence to GAAP principles is essential to uphold the integrity of financial reporting.