The standard framework of accounting rules, conventions, and practices used in the United States. Some commercial leases require landlords to prepare CAM reconciliations in accordance with GAAP, which governs how expenses are recognized, classified, and reported.
GAAP is established by the Financial Accounting Standards Board (FASB) and provides the authoritative framework for financial reporting in the U.S. When a lease requires GAAP-compliant reconciliations, the landlord must follow specific rules for expense recognition (accrual basis), capital versus operating expense classification, depreciation methods, and related-party transaction disclosure. A GAAP requirement gives tenants a defined standard against which to measure the landlord's accounting practices and strengthens audit rights by creating an objective benchmark.
A lease required GAAP-compliant reconciliations, but the landlord expensed a $200,000 roof replacement as a single-year operating cost rather than capitalizing it as GAAP requires. When the tenant challenged the charge, the landlord argued that "GAAP compliance" only applied to the format of the statement, not the substance of the accounting.
If your lease requires GAAP-compliant reconciliations, use that clause aggressively. GAAP has specific rules about capitalizing assets with useful lives beyond one year. Any large expenditure that the landlord treated as a single-year expense may violate GAAP, giving you a strong basis to dispute the charge.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
