COMPUSTAT Definitions
Posted: 12 February 2013 08:52 AM   [ Ignore ]
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Dear All,

I am master student of the University of Hamburg (Germany). Currently I am working with Compustat. Mostly the work with database is very intuitive. But in the context of one issue I am still uncertain:

Compustat sometimes provides different definitions of the same data item, e.g. SG&A costs.

- One definition is the ‘U.S. and Canadian GAAP Definition’ and the nother one is an ‘International Normalized Definition’. When do I need to apply which definition? Is it correct, that I should use the ‘U.S. and Canadian GAAP Definition’, when I work with the ‘North America database’ and in cases where I am working with the ‘global database’ the ‘International Normalized Definition’ is the correct one?

Thanks a lot for your support in advance. I appreciate your help a lot.

Kind regards, Chris

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Posted: 12 February 2013 09:33 PM   [ Ignore ]   [ # 1 ]
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hi Chris,

I don’t have experience with the SG&A specifically. I think it would be good to also compare the availability of both items. Even though there are about 1,000 variables listed, many variables are not well populated.

Another thing you could do, is to select a few observations where both variables differ materially, and then look in the underlying 10-K to see what variable makes most sense to you.

It is probably good to run your tests with each variable. Select the best one bast on availability and how well it captures the economics, and report the main tables using this best variable. Report sensitivity/footnotes using the other variable.

Hope this helps,

Joost

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Posted: 13 February 2013 11:07 AM   [ Ignore ]   [ # 2 ]
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Hey Joost,

thanks a lot for your quite quick response. Maybe my description of my problem was i bit unprecise - sorry for that. I am trying to clarify my issue.

I am working with the annual fundamentals of north american companies. When I fill out my query and I click on the ‘question mark - icon’ behind XSGA, under ‘income statement items’, COMPUSTAT gives me two different definitions (the ‘U.S. and Canadian GAAP Definition’ and the ‘International Normalized Definition’). It is not that I got the choice between different SG&A items. The definitions differ in respect of the composition of the SG&A item - under each defintion the costs which are incorporated in the SG&A are slightly different. Hence my question is, which definition do I need to apply when I work with north american companies.

May you can check it on WRDS?

Thank you so much. Wish you a fantastic day.

Kind regards, Chris

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Posted: 14 February 2013 01:59 PM   [ Ignore ]   [ # 3 ]
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hi Chris,

No problem; I have looked at it and I am afraid I still don’t understand your question. What I understand is that there are 2 definitions of how XSGA is computed; the Canada/US definition, and the international definition. Since you are using Compustat North America, the XSGA will be in line with the Canada/US definition. I don’t think you would need to do anything or apply something. Like you explained, there is no choice really.

best regards,

Joost

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Posted: 15 February 2013 06:19 AM   [ Ignore ]   [ # 4 ]
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hey joost,

thanks a lot for your support. this was a quite simple answer, which fits 100% to my a question. I think I formulated my question a bit to complicated with respect to this simple issue - it might be due to the fact that i am not a native speaker grin

thanks a again and have a nice day.

cheers, chris

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Posted: 15 February 2013 08:00 PM   [ Ignore ]   [ # 5 ]
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hi Chris,

No problem & you’re welcome; I’m glad it worked out smile

best regards,

Joost

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