GAAP vs LOI
GAAP (Generally Accepted Accounting Principles) and LOI (Letter of Intent) both come up in business conversations and get confused. Here's the plain-English difference, side by side, so you can use each one with confidence.
The key difference: GAAP refers to generally accepted accounting principles, while LOI refers to letter of intent — they describe different things even when they show up in the same sentence.
GAAP — Generally Accepted Accounting Principles
The standard framework U.S. companies must use when preparing financial statements. GAAP rules make filings comparable across companies and quarters.
LOI — Letter of Intent
A non-binding document outlining the key terms of a proposed deal — typically price, structure, and timeline — before the lawyers draft the real contract. LOIs signal serious intent without legally locking either party in.
When to use GAAP
Reach for "GAAP" when the conversation is specifically about generally accepted accounting principles. The standard framework U.S. companies must use when preparing financial statements. GAAP rules make filings comparable across companies and quarters.
When to use LOI
Reach for "LOI" when the conversation is specifically about letter of intent. A non-binding document outlining the key terms of a proposed deal — typically price, structure, and timeline — before the lawyers draft the real contract. LOIs signal serious intent without legally locking either party in.
FAQs
What is the difference between GAAP and LOI?
GAAP stands for Generally Accepted Accounting Principles — The standard framework U.S. companies must use when preparing financial statements. GAAP rules make filings comparable across companies and quarters. LOI stands for Letter of Intent — A non-binding document outlining the key terms of a proposed deal — typically price, structure, and timeline — before the lawyers draft the real contract. LOIs signal serious intent without legally locking either party in.
Are GAAP and LOI the same thing?
No. They're often used in the same conversation because they're related, but they describe different concepts. GAAP = Generally Accepted Accounting Principles. LOI = Letter of Intent.
When should I use GAAP vs LOI?
Use GAAP when you're specifically referring to generally accepted accounting principles. Use LOI when the topic is letter of intent.