What Are Lady Godiva Accounting Principles?
The term Lady Godiva Accounting Principles represents a theoretical set of accounting principles under which corporations would have to fully disclose all information. This includes information which often doesn't get reported to investors under Generally Accepted Accounting Principles (GAAP). Examples of these items include the following:
- All off-balance sheet items
- How 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
Understanding Lady Godiva Accounting Principles
Lady Godiva Accounting Principles is a buzzphrase 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 Lady Godiva Accounting Principles 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.