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Understanding GAAP
So many contracts contain the phrase “in accordance with generally accepted accounting principles,” but do lawyers really understand what this phrase means or how it may affect a client in any given contract? Generally accepted accounting principles, often referred to simply as GAAP, constitute a body of rules, principles, and practices that is not as well defined as many people think, despite the fact that the fortunes of a company, its managers, and its investors can rise and fall depending on how GAAP is applied to determine the company's financial results. Before placing the above phrase in a contract, a lawyer should have at least a basic understanding of how that phrase may operate within the contractual terms.
U.S. GAAP is the term that describes the rules companies use to prepare financial statements ' the rules that tell companies how to account for transactions and disclose the results. When people refer to GAAP, they generally mean the body of accounting rules developed from a succession of different standard setters. Today, these rules have mostly been rolled into one primary authoritative source known as the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). However, not all of the rules that companies follow as GAAP are found in the Codification. The Codification excludes some followed guidance and even leaves some of the principles up to industry practice. For example, the very basic definition of an asset is not in the Codification. The term “asset” is defined in a FASB Concepts Statement, but FASB Concepts Statements have been excluded from the Codification and, thus, are non-authoritative literature that, nonetheless, are considered GAAP in the absence of specific guidance in the Codification.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
Coverage Issues Stemming from Dry Cleaner Contamination Suits
In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.