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The Importance of GAAP Financial Statements

by | Sep 20, 2022 | PKF Texas - The Entrepreneur's Playbook®, Insight-Post

GAAP financial statements can help streamline the due diligence process for buyers and sellers of businesses. How so? Check out the next episode of PKF Texas – The Entrepreneur’s Playbook® with PKF Texas Audit Senior Manager, Kimberly Wood, CPA, CEPA.

Jen: This is the PKF Texas – Entrepreneur’s Playbook®. I’m Jen Lemanski, and I’m back again with Kimberly Wood, an Audit Senior Manager and one of the Approachable Advisors™ here at PKF Texas. Kimberly, welcome back.

Kimberly: Thanks for having me.

Jen: So, we’ve talked about audits in some previous videos that we’ve done with you. And so, why is it important to have GAAP financial statements?

Kimberly: Yeah, so institutional buyers generally looking for accrual basis of accounting, and that is essentially GAAP. They believe GAAP financial statements better reflect the statement of operations in the financial position. This can streamline the due diligence process and make things easier when it comes to negotiation, which then will relay into a better exit price. Potential buyers are generally looking for three years of audited financial statements

Jen: And remind our viewers in case they’re not as well versed in accounting lingo as we are. What does GAAP stand for?

Kimberly: Generally Accepted Accounting Principles.

Jen: Sounds good. Kimberly, thanks so much for being here today. We’ll get you back to talk about transaction-related topics in the future. Sound good?

Kimberly: Sounds good.

Jen: This has been another thought leadership production brought to you by PKF Texas – The Entrepreneur’s Playbook®. For more information about this and other topics, visit www.PKFTexas.com. Tune in next week for another chapter.

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