Introduction
Every US company that files with the Securities and Exchange Commission (SEC) reports under the same US generally accepted accounting principles (US GAAP), yet a bank's income statement has no revenue line of the usual kind, an insurer's largest liability is an estimate of claims it has yet to pay, some of them not yet reported, an oil producer's most valuable assets often appear at a fraction of their worth, and a real estate investment trust (REIT) reports depreciation on buildings that are rising in value. Analysts covering these industries rarely talk about earnings before interest, taxes, depreciation and amortization (EBITDA). They talk about net interest margin, combined ratio, EBITDAX (EBITDA before exploration expense) and funds from operations.
The differences are not quirks. They follow from what the businesses do, and they decide which figures bankers can use and which they need to replace. Three forces drive them: the economics of each business, the extra rules that standard setters and regulators add on top of the general ones, and the sector metrics analysts have built to fill the gaps.
Where the Economics Differ
The general framework of US GAAP was built around companies that buy inputs, make or deliver something and sell it, with interest and taxes as costs of financing and government. Several industries do not fit that pattern, and their statements show it.
Financial Institutions
For a bank, money is the product. Interest paid on deposits is effectively its cost of goods, interest earned on loans and securities its main revenue, and the balance sheet, not the income statement, is the business. Operating income and EBITDA lose their meaning when interest is the core of operations, which is why bank analysis starts from net interest income, credit losses and capital, as explained in the bank financial statements primer.
An insurer collects premiums today and pays claims later, sometimes decades later, investing the money in between. Its results depend on estimates of liabilities whose final cost is unknown, and on the returns from the investment portfolio those liabilities fund. The insurance financial statements primer explains how premiums, reserves and investment income fit together.
Reserves and Real Estate
An oil producer's main asset is its reserves in the ground, recorded at what it cost to find and develop them rather than at what they are worth, and depleted as they are produced. Companies choose between two methods of accounting for exploration, with very different effects on earnings: ExxonMobil, using successful efforts, expensed about $1.0 billion of exploration costs including dry holes in 2025, according to its 2025 annual report, costs that a full cost company would have capitalized. The oil and gas accounting primer sets out the choice.
Real estate creates the opposite problem. Buildings are depreciated under GAAP even when their value is rising, so net income understates the cash a property portfolio generates and the value it creates. REITs therefore report funds from operations (FFO), which adds the depreciation back, the measure covered in the REIT accounting primer.
Contracts, Subscriptions and Research
Operating businesses face their own versions. A shipbuilder or engineering contractor may work on one contract for years, so revenue is recognized over time on estimates of progress and of the costs to complete, the subject of construction and long-term contract accounting. A software company collects subscriptions in advance and recognizes them over the contract term: Microsoft carried $73.0 billion of short-term unearned revenue at the end of its fiscal year to June 2026, as its 2026 annual report shows, obligations it will settle by delivering services. The software and SaaS primer covers the consequences.
A drug developer spends years and billions before knowing whether a product will succeed, and US GAAP requires most of that spending to be expensed as incurred, while acquired research can be either capitalized or expensed depending on how it was bought, as described in pharma and biotech accounting. And retailers, with thin margins, fast-moving inventory and large store leases, are judged on measures such as same-store sales and lease-adjusted leverage, covered in retail accounting.
Where the Rules Differ
US GAAP Has Industry Topics
The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) contains a whole area of industry topics, numbered in the 900s from Agriculture (905) to Software (985), alongside the general topics that apply to everyone. They include guidance for contractors, entertainment and media, extractive activities including oil and gas, depository and lending institutions, insurance, investment companies, real estate, regulated operations and software. Some of these topics add requirements, such as the supplementary oil and gas reserve disclosures; others modify the general rules, such as the measurement of insurance liabilities.
- Regulated operations
Accounting under ASC 980 for businesses, mainly utilities, whose rates are set by an independent regulator to recover their costs. Costs the regulator is expected to allow in future rates can be deferred as regulatory assets, and amounts expected to be returned to customers recorded as regulatory liabilities, so the timing of expense follows the rate-making process rather than the general rules.
Regulators Add Their Own Rules
Many industries report to regulators as well as investors, on different bases. Banks calculate regulatory capital under rules that start from GAAP equity but adjust it. US insurers file statutory accounts with state regulators, prepared under statutory accounting principles that are more conservative than GAAP. Utilities report to rate regulators, whose decisions drive their regulatory assets. REITs must meet tax rules on income, assets and distributions to keep their status. Often the figures that matter most to these businesses, such as a bank's capital ratio or an insurer's statutory surplus, are not in the GAAP statements at all.
What Bankers Use Instead
Because the standard metrics fail in these industries, each has developed its own. The main ones compare as follows:
| Industry | What is different | Metrics bankers use |
|---|---|---|
| Banks | Interest is revenue and cost; the balance sheet is the business | Net interest margin, efficiency ratio, return on tangible common equity (ROTCE), common equity tier 1 (CET1) ratio, price to tangible book |
| Insurers | Liabilities are long-dated estimates; investment income matters | Combined ratio, reserve development, book value per share, return on equity (ROE) |
| Oil and gas producers | Reserves at cost; accounting method choice; depletion | EBITDAX, reserves, production, finding and development costs, PV-10 (reserves discounted at 10%) |
| REITs | Depreciation on appreciating assets; tax-driven structure | FFO, adjusted FFO (AFFO), net operating income, net asset value |
| Software | Subscription revenue recognized over time; costs expensed early | Annual recurring revenue (ARR), net revenue retention, remaining performance obligations, rule of 40 |
| Retail | Thin margins, high turnover, large leases | Same-store sales, sales per square foot, inventory turnover, EBITDAR (EBITDA before rent) |
| Contractors | Revenue on estimates of progress; backlog | Backlog, book-to-bill, contract assets and liabilities |
| Pharma and biotech | Research and development (R&D) expensed; value in the pipeline | R&D intensity, pipeline value, sales by product |
Many of these measures are not defined by GAAP. Some are defined by industry bodies instead, such as the definition of funds from operations published by Nareit, and others, such as the CET1 ratio, by bank regulators. Adjusted versions of GAAP figures, such as FFO or EBITDAX, are non-GAAP financial measures subject to the SEC's rules when companies present them, while measures required by a regulator and purely operating figures such as production volumes fall outside the definition in Regulation G. Either way, bankers should apply them consistently across a peer set, the discipline described in non-GAAP measures.
Valuation Changes Too
The choice of metric follows into valuation. Banks and insurers are valued on price to book or tangible book and on earnings, because their balance sheets are their businesses and debt is an operating item, not financing. Oil and gas producers are compared on enterprise value to EBITDAX, a measure that adds back exploration expense so that companies using different accounting methods can be compared. REITs trade on multiples of funds from operations and against their net asset value. Software companies are often valued on revenue or recurring revenue when earnings are small. A banker who applies an EBITDA multiple to a bank, or a price-to-earnings multiple to a REIT without adjusting for depreciation, will reach a misleading answer.
Reading Specialized Statements
Each specialized industry leaves the same fingerprints in its filings: a policy note that names the industry method chosen, supplementary disclosures the general rules do not require (reserve tables for oil producers, loss development tables for insurers, regulatory capital ratios for banks), and a set of non-GAAP or operating measures in the earnings release. Finding those three things first tells a banker which figures will carry the analysis, in the primers that follow and in the sector guides that cover each industry in depth.
The common thread is that accounting is a model of a business, and each industry's model is built around what drives its value. Learning the general rules first, then the specific ones, lets a banker see where a company's statements represent its economics well and where they need to be supplemented, the same habit of breaking figures into their parts that applies to any company's statements.
