GAAP Is a Point, Not an Oval!
Response to the following problem:
You are the chief financial officer (CFO) of Lorien Company, which is publicly traded. At the annual shareholders' meeting, you have been asked to discuss the company's recent reported results. As part of your presentation, you illustrated the minimum and maximum values for net income that could have been reported by Lorien using a range of accounting assumptions used by other companies in your industry. Your statement prompted a cry of outrage from one of the shareholders present at the meeting. This shareholder accused you of being an unprincipled liar. This shareholder stated that any suggestion that there is a range of possible net income values for a given company in a given year indicates an overly liberal approach to financial reporting. This shareholder has moved that your employment contract be immediately terminated because of an apparent lack of moral character.
The shareholder's arguments have been persuasive to a large number of people present at the meeting. What can you say to defend yourself?