THE PAGE TURNS

April 8, 2021April 9, 2021

G is for GAAP

GAAP illustration design from Oracle Netsuite marketing site.

GAAP. FASB. AICPA. APB. If you studied accounting formally, the first few pages of your textbook typically listed a set of acronyms that would make your eyelids flutter. The Financial Accounting Standards Board, the American Institute of CPAs, the Accounting Principles Board, etc. Buncha old (white) guys doing boring talking, as my son used to describe it. Except that what these guys do (and a handful of gals*) is remarkable. Because they set the standards for every other company in the United States.

GAAP stands for Generally Accepted Accounting Principles, and it’s the prodigious set of rules that dictate how businesses should report their financial results. FASB is an independent group, elected from the community of practicing accountants. That means accountants are part of a guild.

G is also for Guild

If you remember your history of guilds, they arose in the Middle Ages as artisans developed their crafts and wanted to set their product standards. Rules were developed for certification to become part of the guild, and the guild stamp of approval reflected its authenticity and craftsmanship.

April 8, 2021April 8, 2021

F is for Fraud

Enough of the accounting philosophy, let’s talk about something more fun. Fraud!

If accounting is as old as the hills, so is fraud. If you recall my post about Clay Balls a few days ago, you may remember that they were storage for tokens carried by tax collectors. The tokens were stored inside hollowed balls to “prevent tampering.” In other words, tampering–tax collectors collecting a few of the tokens to barter for their own purposes–was already a common practice in 3000 B.C.E. Where there are tax collectors, there are corrupt tax collectors, apparently.

Oops! My Warehouse Burned Down…Insurance Fraud

There was also ancient insurance, and with that came ancient insurance fraud. Ancient merchants purchased “bottomry” contracts (now there’s a word!) in Babylon as early as the third millennium BCE, as did Hindus, Greeks, and others. A trader would get a loan for his cargo and pay an extra fee for insurance, with the interest on the loan also helping cover the loss. When the ship came in, if he defaulted on the loan, the insurer would keep the cargo.

The Greek merchant Hegestratos decided to try an end run around his bottomry contract, in 360 BCE. He had received a cash advance and figured to keep it–and the corn–and claim an insurance loss. He put the corn in secret storage and sailed the ship, but empty. However, there were other passengers on the ship, and they were not too keen when they noticed him trying to scuttle the empty vessel. They chased him off, and he drowned. So much for early insurance fraud!

April 6, 2021April 7, 2021

E is for Earnings

While we look for harmonious balance, we are also creatures of change and achievement. We yearn also to count. Any youngster who approaches a pond with pebbles will toss them in and count the skips or try to hit the lily pad ten times. Or a crew rows by us on the river and we count the strokes. Well, maybe I just do because I was raised on Sesame Street. Remember The Count? Vun…doo…tree bats… ah.ah.ahh…

The river of time flows by, but we are compelled to stop and take reckoning every so and often, after a month, the year. What comes in, what goes out? Are we draining our resources or building a surplus?