In the hierarchy of US GAAP, widely recognized industry practices are Category D while anything more authoritative is in the first three categories.  Then there is the “other” category below Category D which would include, among other things, textbooks, articles, and for that matter, perhaps even this blog.  Ironically, in the absence of any specific guidance, one of the best sources of GAAP is the lowest level or simply “what other companies do”.

I can’t count how many times I’ve had a client ask me that question – What do other companies do?!  The timing of this question is usually right after I’ve told them they have to defer revenue yet again for some obscure reason that does not make sense in the reality of the business world.  And the tone is mostly of disbelief mixed with a healthy dose of denial.

If enough companies do something in a certain way, it is bound to become at least a Category D – the so-called “diversity in practice” (but yet not objectionable under GAAP).  And even if it doesn’t, discussing the issue with knowledgeable colleagues may, at the very minimum, provide you with one additional source of information to consider.

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I look forward to our discussions and debates.