What is ‘Lady Godiva Accounting Principles – LGAP’
A theoretical set of accounting principles under which corporations would have to fully disclose all information, including that which often doesn’t get reported to investors under generally accepted accounting principles (GAAP).
These principles include disclosure of the following:
-all off-balance sheet items
-how new goodwill accounting rules (introduced in 2002) impact earnings per share (EPS)
-the impact on EPS of stock options issued in lieu of salaries
-how pension expenses are accounted for
Explaining ‘Lady Godiva Accounting Principles – LGAP’
This buzzword was coined by financial analyst Rick Wayman after the Enron bankruptcy.
According to legend, Lady Godiva was a woman who rode a horse naked through Coventry, England, in the 11th century in order to get her husband, the Lord of Coventry, to lift the heavy taxes on his people. The idea of LGAP is that just as the Lady provided “full disclosure” to help her fellow citizens, corporations must do the same thing with their financial disclosures to maintain their credibility with investors.
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