Glossary
Financial Concepts
GAAP (Generally Accepted Accounting Principles)
The standard framework of accounting rules used to prepare financial statements in the United States, governing when and how expenses are recognized. Whether a landlord's CAM reconciliation follows GAAP accrual accounting or a looser cash basis changes which lease year an expense should land in, and mixing the two methods is a common source of timing disputes.
Firm impact
A reconciliation prepared on an inconsistent accounting basis, accrual in one year and cash in another, can shift an expense into a different lease year than where it actually belongs, changing whether a cap or base year calculation applies correctly. Firms should confirm which basis the landlord's reconciliation uses and whether that basis stayed consistent year over year.
How this gets abused
A landlord's CAM reconciliation recognizes a large repair invoice on a cash basis, the year it was paid, rather than an accrual basis, the year the work was actually performed and the expense incurred. The shift moves the cost into a year with more room under the CAM cap instead of the year the cap math should have tested it against.
Practitioner note
Ask the landlord's property management or accounting team which basis the reconciliation is prepared on, and confirm the same basis was used consistently across the years under audit. A basis change between years without disclosure is worth flagging on its own.
FAQ
Questions about gaap (generally accepted accounting principles)
Do CAM reconciliations have to follow GAAP?
Not always by law, but many leases reference GAAP or "generally accepted accounting principles" directly in the definition of operating expenses. When a lease does, the reconciliation should follow it, and any GAAP-excluded item, like a bad debt reserve, is not a valid CAM charge regardless of what the reconciliation shows.
What is the difference between accrual and cash basis accounting in a CAM context?
Accrual accounting recognizes an expense in the year the cost was incurred. Cash basis recognizes it in the year it was paid. The two can put the same expense in different lease years, which matters for cap and base year calculations.
Does CAMAudit check for GAAP-excluded charges in a CAM pool?
Yes. CAMAudit's Excluded Service Charges rule flags GAAP-based exclusions, such as bad debt reserves and litigation reserves, regardless of whether the lease lists them by name, since these are landlord financial risk costs rather than recoverable operating expenses.
You know the term. Now check the math.
Get started to deliver white-label CAM audit reports under your firm brand.