Not all companies need to follow GAAP. The requirement to adhere to GAAP standards primarily applies to publicly traded companies and certain regulated entities. Private companies, small businesses, and nonprofits aren't strictly required to, but many choose to in order to maintain consistency and make their financial statements comparable to those of other entities. Public sector organizations follow standards set by the Governmental Accounting Standards Board (GASB), which are similar but tailored to the public sector's specific needs.