What is GAAP?


By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Generally Accepted Accounting Principles

As a new physician investor, it’s important to know the distinctions between like measurements because the market allows firms to advertise their numbers in ways not otherwise regulated. Often companies will publicize their numbers using either GAAP or non-GAAP measures. GAAP, or generally accepted accounting principles, outlines rules and conventions for reporting financial information. It is a means to standardize financial statements and ensure consistency in reporting.

When a company publicizes its earnings and includes non-GAAP figures, it means it wants to provide investors with an arguably more accurate depiction of the company’s health (for instance, by removing one-time items to smooth out earnings). However, the further a company deviates from GAAP standards, the more room is allocated for some creative accounting and manipulation.

When looking at a company that is publishing non-GAAP numbers, new physician investors should be wary of these pro forma statements, because they may differ greatly from what GAAP deems acceptable.

CITE: https://www.r2library.com/Resource/Title/0826102549



The Core GAAP Principles

GAAP is set forth in 10 primary principles, as follows:

  1. Principle of consistency: This principle ensures that consistent standards are followed in financial reporting from period to period.
  2. Principle of permanent methods: Closely related to the previous principle is that of consistent procedures and practices being applied in accounting and financial reporting to allow comparison.
  3. Principle of non-compensation: This principle states that all aspects of an organization’s performance, whether positive or negative, are to be reported. In other words, it should not compensate (offset) a debt with an asset.
  4. Principle of prudence: All reporting of financial data is to be factual, reasonable, and not speculative.
  5. Principle of regularity: This principle means that all accountants are to consistently abide by the GAAP.
  6. Principle of sincerity: Accountants should perform and report with basic honesty and accuracy.
  7. Principle of good faith: Similar to the previous principle, this principle asserts that anyone involved in financial reporting is expected to be acting honestly and in good faith.
  8. Principle of materiality: All financial reporting should clearly disclose the organization’s genuine financial position.
  9. Principle of continuity: This principle states that all asset valuations in financial reporting are based on the assumption that the business or other entity will continue to operate going forward.
  10. Principle of periodicity: This principle refers to entities abiding by commonly accepted financial reporting periods, such as quarterly or annually.

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BUSINESS MEDICINE: https://www.amazon.com/Business-Medical-Practice-Transformational-Doctors/dp/0826105750/ref=sr_1_9?ie=UTF8&qid=1448163039&sr=8-9&keywords=david+marcinko


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What is “Prudence” in Finance and Investment Management?

Courtesy: http://www.CertifiedMedicalPlanner.org

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PRUDENT BUYER: The efficient purchaser of market balance between value and cost.

PRUDENT MAN RULE: An 1830 court case stating that a person in a fiduciary capacity (a trustee, executor, custodian, etc) must conduct him/herself faithfully and exercise sound judgment when investing monies under care. “He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent distribution of their funds, considering the probable income as well as the probable safety of the capital to be invested.” Allows for mutual funds and variable annuities.

PRUDENT INVESTOR RULE: A fiduciary is required to conduct him/herself faithfully and exercise sound judgment when investing monies and take measured and reasonable investment risks in return for potential future rewards. Allows for mutual funds, stocks, bonds, variable annuities asset allocation & Modern Portfolio Theory.

CITATION: https://www.r2library.com/Resource/Title/0826102549

Product Details

UNIFORM PRUDENT INVESTOR ACT: https://medicalexecutivepost.com/2011/02/18/the-uniform-prudent-investor-act-versus-fiduciary-accountability/

EDITOR’S NOTE: We interviewed noted authority Ben Aikin AIF® on this topic more than a decade ago. He was ahead of his time regarding fiduciary accountability and we appreciate his insights.

Dr. David Edward Marcinko MBA CMP®


INTERVIEW: https://medicalexecutivepost.com/2009/03/01/an-interview-with-bennett-aikin-aif/

FIDUCIARY OATH: http://www.thefiduciarystandard.org/wp-content/uploads/2015/02/fiduciaryoath_individual.pdf

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Social Determinants of Health from Inside the Hospital System


By Staff Reporters



READ: Social determinants of health aren’t just for patients. Health systems looking to promote health equity within their communities can start internally, by looking at their own workforce; according to HealthcareBrew.




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