What is GAAP?
GAAP or Generally Accepted Accounting Principles refers to a certain set of rules or standards issued by FASB or the Financial Accounting Standards Board. Public companies in the United States must follow GAAP when their accountants compile their financial statements. GAAP is essential in company reporting because It attempts to standardize and regulate the definitions, assumptions, and methods used in accounting across all industries. Or in other words, it allows investors to accurately compare and contrast businesses in the market using the same metrics. It’s important to remember that GAAP applies to your accounting statements that are shared with the government/public. However, GAAP is not applicable to financial models, which is what MRGN provides, because financial models are generally used for internal projections or estimates.
For more information on this topic, check out this article from our friends at Investopedia: