So you’ve dazzled your friends and family with the history of the high five and left them with a promise for more. Forget watching the end of “Breaking Bad,” this is clearly what they have been desperately wanting a conclusion to all week. Now for how in the world the history of the high five relates to GAAP compliance:
The key take away from the history of the high five is that we teach, learn, and grow to agree upon meaning for certain rules and rituals of communication including expressions and mutual gestures. This allows us to relay the message we want, short and sweet. This isn’t a new concept. Those with limited communication due to communication barriers have long understood what it means to have a means, medium, or rules for communication and engagement for success in growing and networking as individuals or groups. When those rules are habitual to a group, it allows for easy communication that is quickly understood. Just like over a century this was done with developing the high five as a simple means of sharing excitement, the same can be said for the rules of accounting and demonstrating financial success/excitement.
If you want to communicate success, how do you do it? By speaking the language that everyone understands: GAAP. That’s not to say there aren’t other rules/languages, but that is the means of communication you and everyone else in the space have agreed to use in that space. Communication errors and barriers exist once you pull away from the rules. When you recognize revenue, the best way to eradicate communication errors and barriers when looking for funding is by being GAAP compliant, the sooner the better.
GAAP, the generally accepted accounting principles, allows for companies of all sizes, ages, and stages to understand the joy of success you are trying to communicate without risk of overvaluation and potentially looking like you incurred a huge loss: for start-ups, anything but constant ramp up can be a sign of disaster and funding will sure to find other opportunities. Your revenue recognition process is important as it is the chosen form of communication of success and potential to others.
GAAP Compliance and the History of the High Five:(http://www.prorata.com/blog/uncategorized/gaap-compliance-and-the-history-of-the-high-five/)