Handling mixed accounting methods before “little GAAP”
Abstract: Lenders must deal with a mishmash of accounting standards when reviewing borrowers’ financial statements. Some companies follow Generally Accepted Accounting Principles (GAAP), and some use tax or cash basis methods. Others adopt International Financial Reporting Standards for small and medium entities, or they use other comprehensive bases of accounting. This inconsistency creates due diligence headaches. This article discusses the pace of progress toward establishing a simpler form of GAAP — “little GAAP” — for smaller companies, while a sidebar lists specific areas where GAAP is problematic.