Financial Statements

I think the article from Christine Lauber makes a lot of very interesting points. I like how she compared GAAP financial results to the final score of a basketball game. I would definitely agree with this analogy because of the way GAAP is applied. The rules that are associated with GAAP are somewhat effective when measuring what goes on in a specific time period; however, these rules do not reveal all the details that investors and other financial statement users may want to know.

The principles associated with GAAP are useful for investors who want to compare companies in the same industry. This is true because when different companies conduct business in the same industry they should apply similar GAAP rules when making professional judgments. This gives investors the ability to compare different companies side by side using the numbers provided in the financial statements that are in accordance with GAAP.

The author’s analogy is a good example of how financial statements can be misleading. When financial statement users follow GAAP financial statements all they can see is what happened during a specific period of time. For example, when a user reviews the income statement using GAAP they see revenues and expenses as a whole that occurred during a period. When a user reviews the balance sheet using GAAP they see where a particular entity stands at the end of a designated period. However, there are many underlying details behind these numbers that must also be taken into account. The author compares the use of GAAP to the final score of a basketball game which I find to be very accurate. Basketball is an extremely strategic sport. Although you may lose a basketball game your coach might be impressed with the way the game was played. I find this to be very similar to the way many companies operate. There are many intricate details that go on behind the scenes which heavily influences a way a company operates. For example, when reviewing GAAP financial