GAAP Framework FASB & SEC Standards Primary Source of GAAP Recognition When to record transactions Measurement How to value assets & liabilities Presentation How to report financial information Going Concern Business Continuity Consistency Uniform Methods Matching Revenue & Expenses Materiality Significance Financial Statements Balance Sheet Assets, Liabilities & Equity Income Statement Revenue, Expenses & Profit/Loss Cash Flow Operating, Investing & Financing Notes & Disclosures Additional Context & Explanations
GAAP System Hierarchy FASB Conceptual Framework Objectives, Qualitative Characteristics, Elements ASC Topics (Codification) Detailed Technical Standards by Subject Matter ASUs Updates and Changes to Standards Implementation Guidance FASB Staff Positions & Interpretations Industry-Specific Guidance Banking, Insurance, Airlines, Healthcare, etc. Practical Application Recognition Criteria - Probable Future Benefits/Obligations - Reliable Measurement Measurement Principles - Historical Cost - Fair Value Disclosure Requirements - Financial Statements - Notes & Supplementary Info Quality Controls - Internal Controls - Audit Requirements
GAAP Interconnected Network Core Principles Revenue Recognition Asset Measurement Liability Recognition Disclosure Requirements Contracts Fair Value Industry Specific Control Reporting Materiality Connection Types: Direct Relationship Indirect Impact Complex Interaction
FASB/IASB (Private Sector) SEC (Public Sector) GAAP Lattice of Standard Tools Principles, Standards, Guidelines Company Scaffolding Company Value Engine Operating Segments Chart of Accounts Reporting Reconciliation Consolidation Market Regulation Federal Regulations Investor Protection Free Market Principles Filing EDGAR Public Access Platform Security Asset Market Trading
Growth Enablement Executive Team Hidden Cost Model Charts of Accounts Financial Assumptions Spending Patterns Analysis Engine Value Engine 1. Calibrate 2. Collect 3. Validate Decision Framework Optimization Strategies Structured Decision-Making Common Foundation Leadership Action Decide 1. Review 2. Decide 3. Share Operational Truth Center Integrated View of Financial Reality and Operational Performance
Governance Framework Principles Matching Consistency Full Disclosure Relevance & Prudence Standards ACS 280: Segment Reporting ACS 720: Cost of Sales ACS 606: Revenue Recognition ACS 340-40: Contract Costs Guidelines FASB ACS 235: Allocation SEC Reg S-X: Pro Forma ASC 720: SG&A Reporting SOX 404: Internal Controls Operational System Growth Enablement Hidden Cost Model Applies: ACS 720, ACS 280 Follows: Matching & Consistency Guided by: FASB ACS 235 Value Engine Process Applies: ACS 606, ACS 340-40 Follows: Relevance & Prudence Guided by: SOX 404 Executive Decision Making Analysis Framework Applies: Segment Reporting Follows: Full Disclosure Guided by: SEC Pro Forma Leadership Action Applies: ASC 720 Guidelines Follows: Consistency Guided by: Internal Controls >
GAAP Framework Integration Relevant Standards ACS 606: Revenue Recognition ACS 720: Cost of Sales ACS 280: Segment Reporting ACS 340-40: Contract Costs Governing Principles Matching: Revenue/Cost Alignment Consistency: Uniform Measurement Full Disclosure: Performance Clarity Relevance: Decision Usefulness Implementation Guidelines FASB ACS 235: Cost Allocation Revenue Segmentation Guidelines SG&A Reporting Structure SOX 404: Control Framework Commercial Ratio Analysis Input Metrics Sales & Marketing • Campaign Costs • Sales Force Expenses • Market Development • Channel Investment Cost of Sales • Direct Production Costs • Service Delivery Expenses • Support Infrastructure Value Engine Commercial Ratio Processing Output Metrics Revenue Growth • Period-over-Period Growth • New Customer Revenue • Market Share Gains Retained Revenue • Customer Retention Rate • Recurring Revenue • Contract Renewal Value
Revenue Attribution Model Our Baseline Model Sales & Marketing Cost of Sales Growth Revenue Retained Revenue Clear Baseline Assumptions: 100% Attribution to Growth or Retention Typical Organizational Reality Mixed Attribution Unclear Relationships Unknown Allocations Common Challenges: Unknown Spending Attribution • Mixed Activities • Unclear Results Maturity Evolution Stage 1 Baseline Model • Clear Categories • Simple Attribution • 100% Allocation Stage 2 Refined Tracking • Activity Tagging • Better Attribution • Mixed Allocation Stage 3 Advanced Analysis • Detailed Tracking • Precise Attribution • Dynamic Allocation Stage 4 Optimization • Predictive Models • Real-time Analysis • Strategic Planning
< Customer-Backward Sales Cost Analysis Customer Has Money Could Buy Engage Open-Ended Interaction Salespeople Quota-Carrying Only Clear Definition Critical Variable T&E Commissions Supporting Infrastructure Recognition Hidden in G&A Develop Training Leverage Systems Analysis Direction: Customer Backward Traditional Budget Category Mapping General & Admin Sales Expense Marketing Customer Success First Principles Approach Reveals Costs Hidden Across Traditional Categories
Retention Cost Structure Cost of Sales → Retain Revenue Direct Relationship to Customer Retention Support First Line Customer Interface Specialists Technical and Domain Expertise Production Core Product/Service Maintenance Delivery Service/Product Fulfillment Validation Direct Customer Service Clear Boundaries Measurable Costs No Growth Overlap GAAP Compliant Cost Attribution Customer Support Costs Technical Resources Operating Expenses Delivery Infrastructure Clear Operational Boundaries Support Accurate Cost Attribution