Reporting Non-GAAP Financial Measures

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Publisher : Cambridge Scholars Publishing
ISBN 13 : 1527543978
Total Pages : 420 pages
Book Rating : 4.5/5 (275 download)

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Book Synopsis Reporting Non-GAAP Financial Measures by : Nicola Moscariello

Download or read book Reporting Non-GAAP Financial Measures written by Nicola Moscariello and published by Cambridge Scholars Publishing. This book was released on 2019-11-25 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of alternative performance indicators (APMs) (also known as ‘Non-GAAP’ earnings) is a widespread phenomenon, and the increased reliance on APMs has recently triggered a strong debate among regulators, managers and investors on the nature of these ‘tailored’ earnings and on the economic reasons behind them. On one hand, APMs might reflect managers’ attempt to offer useful information to predict companies’ future sustainable cash-flows and earnings (information hypothesis), while, on the other, the non-standardized nature of these metrics impacts on the comparability of the financial results, and reduces the reliability and the faithful representation of financial information (opportunistic hypothesis). By collecting several theoretical and empirical contributions on APMs, this book provides a number of interesting and useful insights on the economics of APMs and their impact on financial markets.

Reporting Non-GAAP Financial Measures

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Author :
Publisher :
ISBN 13 : 9781527570160
Total Pages : pages
Book Rating : 4.5/5 (71 download)

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Book Synopsis Reporting Non-GAAP Financial Measures by : Nicola Moscariello

Download or read book Reporting Non-GAAP Financial Measures written by Nicola Moscariello and published by . This book was released on 2021-08 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of alternative performance indicators (APMs) (also known as 'Non-GAAP' earnings) is a widespread phenomenon, and the increased reliance on APMs has recently triggered a strong debate among regulators, managers and investors on the nature of these 'tailored' earnings and on the economic reasons behind them. On one hand, APMs might reflect managers' attempt to offer useful information to predict companies' future sustainable cash-flows and earnings (information hypothesis), while, on the other, the non-standardized nature of these metrics impacts on the comparability of the financial results, and reduces the reliability and the faithful representation of financial information (opportunistic hypothesis). By collecting several theoretical and empirical contributions on APMs, this book provides a number of interesting and useful insights on the economics of APMs and their impact on financial markets.

Small Cap Financial Reporting

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Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Small Cap Financial Reporting by : Linda Campbell

Download or read book Small Cap Financial Reporting written by Linda Campbell and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the determinants of emphasis on non-GAAP disclosures in the earnings announcements of small cap companies. Two proxies of non-GAAP information emphasis are investigated -- placement of the first non-GAAP disclosure and placement of the non-GAAP to GAAP reconciliation required by Regulation G. Using hand-collected data from fourth quarter press releases, we find evidence indicating that small cap firms place a higher level of emphasis on non-GAAP financial measures when GAAP earnings suggest lower value-relevance and when their shares are owned by a higher proportion of institutional investors. We also find that small cap companies decrease the level of emphasis placed on non-GAAP information as their listing tenure increases.

The Pitfalls of Non-GAAP Metrics

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Author :
Publisher :
ISBN 13 :
Total Pages : 7 pages
Book Rating : 4.:/5 (11 download)

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Book Synopsis The Pitfalls of Non-GAAP Metrics by : H. David Sherman

Download or read book The Pitfalls of Non-GAAP Metrics written by H. David Sherman and published by . This book was released on 2017 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: For decades, companies have used custom metrics that don't conform to generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS) as supplements to their official financial statements. Some common non-GAAP measures include adjusted earnings before interest, taxes, depreciation, and amortization (known as adjusted EBITDA), free cash flow, funds from operations, adjusted revenues, adjusted earnings, adjusted earnings per share, and net debt. However, as the authors point out, it's not unusual for these alternative measures to lead to problems. Since companies devise their own methods of calculation, it's difficult to compare the metrics from company to company - or, in many cases, from year to year within the same company. According to the authors, alternative measures, once used fairly sparingly and shared mostly with a small group of professional investors, have become more ubiquitous and further and further disconnected from reality. In 2013, McKinsey and Company found that all of the 25 largest U.S.-based nonfinancial companies reported some form of non-GAAP earnings. Press releases and earnings-call summaries often present non-GAAP measures that are increasingly detached from their GAAP-based equivalents. In addition to creating potential problems for investors, the authors argue, alternative metrics can harm companies themselves by obscuring their financial health, overstating their growth prospects beyond what standard GAAP measures would support, and rewarding executives beyond what is justified. Board members, top executives, compliance officers, and corporate strategists need to make sure that whatever alternative measures companies use improve transparency and reduce bias in financial reports. Although no standard is perfect, the authors note that GAAP and IFRS standards provide a foundation for consistent measurement of corporate performance over time and across businesses.

Transparency and consistency of non-GAAP reporting across Europe

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Author :
Publisher : GRIN Verlag
ISBN 13 : 3346712443
Total Pages : 47 pages
Book Rating : 4.3/5 (467 download)

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Book Synopsis Transparency and consistency of non-GAAP reporting across Europe by : Christoph Beis

Download or read book Transparency and consistency of non-GAAP reporting across Europe written by Christoph Beis and published by GRIN Verlag. This book was released on 2022-09-01 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2017 in the subject Economics - Finance, grade: 1,0, University of Mannheim, language: English, abstract: Non-Generally Accepted Accounting Principles (non-GAAP) measures are figures that are not legally defined as opposed to GAAP measures which are specified by the laws of every country in order to ensure a true and fair view. The European non-GAAP disclosures will be examined with respect to transparency and consistency across companies, countries and time horizons. The thesis will point out the ambiguous character of non-GAAP reporting, being both informative and opportunistic. The carried out sample studies of European firms previous findings that non-GAAP reporting is a common procedure in Europe and that usage varies across European countries and industries. Moreover, it extends existing literature by showing that measures even vary within the same industry and over time and that individual factors, such as the variable pay determination of executives, might be explanatory factors for the usage of non-GAAP figures.

Financial Reporting Handbook

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Author :
Publisher : Aspen Publishers Online
ISBN 13 : 0735546029
Total Pages : 1824 pages
Book Rating : 4.7/5 (355 download)

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Book Synopsis Financial Reporting Handbook by : Michael R. Young

Download or read book Financial Reporting Handbook written by Michael R. Young and published by Aspen Publishers Online. This book was released on 2003 with total page 1824 pages. Available in PDF, EPUB and Kindle. Book excerpt: Never before has a single reference provided such quick access to every critical aspect of financial reporting. In addition to covering the new Sarbanes-Oxley legislation, SEC rules and regulations, and corporate governance standards promulgated by the Independence Standards Board and the AICPA at institutions such as New York Stock Exchange, NASDAQ, and the American Stock Exchange, the Financial Reporting Handbook tackles important underlying themes such as the centrality of the audit committee, the individual responsibility of executives, and the integrity of the outside auditor. Best of all, the Financial Reporting Handbook will be updated every quarter with the relevant laws and regulations that are developed and implemented.

Implications of Non-GAAP Financial Measures on Management Attention in Large Swiss Companies

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Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (113 download)

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Book Synopsis Implications of Non-GAAP Financial Measures on Management Attention in Large Swiss Companies by : Adrian Burkhalter

Download or read book Implications of Non-GAAP Financial Measures on Management Attention in Large Swiss Companies written by Adrian Burkhalter and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The reporting of non-GAAP financial figures is no new phenomenon. Though, in recent years, the practice of disclosing adjusted financial metrics has become increasingly popular. This paper aims to analyze the impact that alternative performance measures have on management attention in Swiss companies. The research is based on data from Thomson Reuters I/B/E/S as well as the newly available data from remuneration-reports following the implementation of Swiss legislation. It is found that adjusted performance figures manage to meet-or-beat analyst consensus significantly more frequently, indicating that management might opportunistically set adjustment amounts to beat market expectations. Furthermore, the thesis provides evidence that executive compensation is significantly dependent on the development of adjusted net income while official net income following GAAP shows no effect. This paper supports various findings of previous research and provides insight into the use of non-GAAP figures in Swiss publicly listed companies.

Financial Statement Analysis

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Author :
Publisher : John Wiley & Sons
ISBN 13 : 1119457149
Total Pages : 427 pages
Book Rating : 4.1/5 (194 download)

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Book Synopsis Financial Statement Analysis by : Martin S. Fridson

Download or read book Financial Statement Analysis written by Martin S. Fridson and published by John Wiley & Sons. This book was released on 2022-04-19 with total page 427 pages. Available in PDF, EPUB and Kindle. Book excerpt: The updated, real-world guide to interpreting and unpacking GAAP and non-GAAP financial statements In Financial Statement Analysis, 5th Edition, leading investment authority Martin Fridson returns with Fernando Alvarez to provide the analytical framework you need to scrutinize financial statements, whether you're evaluating a company's stock price or determining valuations for a merger or acquisition. Rather than taking financial statements at face value, you'll learn practical and straightforward analytical techniques for uncovering the reality behind the numbers. This fully revised and up-to-date 5th Edition offers fresh information that will help you to evaluate financial statements in today's volatile markets and uncertain economy. The declining connection between GAAP earnings and stock prices has introduced a need to discriminate between instructive and misleading non-GAAP alternatives. This book integrates the alternatives and provides guidance on understanding the extent to which non-GAAP reports, particularly from US companies, may be biased. Understanding financial statements is an essential skill for business professionals and investors. Most books on the subject proceed from the questionable premise that companies' objective is to present a true picture of their financial condition. A safer assumption is that they seek to minimize the cost of raising capital by portraying themselves in the most favorable light possible. Financial Statement Analysis teaches readers the tricks that companies use to mislead, so readers can more clearly interpret statements. Learn how to read and understand financial statements prepared according to GAAP and non-GAAP standards Compare CFROI, EVA, Valens, and other non-GAAP methodologies to determine how accurate companies' reports are Improve your business decision making, stock valuations, or merger and acquisition strategy Develop the essential skill of quickly and accurately gathering and assessing information from financial statements of all types Professional analysts, investors, and students will gain valuable knowledge from this updated edition of the popular guide. Filled with real-life examples and expert advice, Financial Statement Analysis, 5th Edition, will help you interpret and unpack financial statements.

Non-GAAP Reporting

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Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (111 download)

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Book Synopsis Non-GAAP Reporting by : Konstantin Grün

Download or read book Non-GAAP Reporting written by Konstantin Grün and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study attempts to enhance understanding regarding the impact of Non-GAAP reporting on the trading behaviour of sophisticated and non-sophisticated investors. For this purpose, the study analyses whether prior research findings concerning disclosure of Non-GAAP EPS and its effect on sophisticated and non-sophisticated investors are still relevant today. In addition, the role of alternative Non-GAAP measures is explored in this context. The alternative Non-GAAP measures that are addressed in this study are passenger load factor, revenue per passenger mile and cost per available seat mile in the airline industry, and value of backlog as well as value of new orders in the homebuilding industry. To test whether findings of prior research are still pertinent, a cross-sectional sample consisting of 4915 quarterly observations concerning Non-GAAP EPS disclosures from 2013-2014 is collected by hand. Two smaller additional cross-sectional samples are collected to investigate the impact of alternative Non-GAAP measures in the homebuilding and airline industries from 2013-2016. Most findings of this study suggest that non-sophisticated investors are more likely to rely on Non-GAAP information than sophisticated investors. However, it is argued that one should be cautious about making overreaching statements concerning Non-GAAP disclosure in general, as has been done by prior research, since not all Non-GAAP figures, such as the passenger load factor in the airline industry, affect the distinguished investor groups differently in their trading behaviour. Furthermore, depending on the context of the Non-GAAP to the related GAAP figures, sophisticated investors may in fact be more likely to rely on Non-GAAP information.

Pro Forma Adjustments to Gaap Earnings

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Author :
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis Pro Forma Adjustments to Gaap Earnings by : Nancy B. Nichols

Download or read book Pro Forma Adjustments to Gaap Earnings written by Nancy B. Nichols and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Securities and Exchange Commission (SEC) issued Regulation G (implementing Section 401 (b) of the Sarbanes-Oxley Act of 2002) in 2003 subsequent to its warning in December 2001 about reporting misleading non-GAAP or pro forma results. This research provides a longitudinal analysis of the earnings releases of a sample of companies reporting pro forma results from 1999 through 2004, especially in the context of recent SEC action. The research examines (1) the specific items included in pro forma adjustments and their frequency, (2) the extent of materiality or magnitude of the adjustments compared to GAAP, and (3) the stated rationale for the adjustments. The research also specifically addresses the impact of the SEC's recent guidance and the extent to which Regulation G has modified pro forma reporting behavior. Our findings indicate pro forma adjustments have continued to be systematically biased in recent years to show significantly higher earnings compared to GAAP earnings and that the magnitude of such differences is highly material. While SEC action, particularly Regulation G, appears to have greatly reduced the number of companies disclosing non-GAAP financial measures and has improved transparency, a significant number of companies continue to make adjustments that are likely of concern to the SEC.

U.S.- Listed Foreign Firms' Non-GAAP Financial Performance Disclosure Behavior

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Author :
Publisher :
ISBN 13 :
Total Pages : 248 pages
Book Rating : 4.:/5 (551 download)

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Book Synopsis U.S.- Listed Foreign Firms' Non-GAAP Financial Performance Disclosure Behavior by : Lori L. Epping

Download or read book U.S.- Listed Foreign Firms' Non-GAAP Financial Performance Disclosure Behavior written by Lori L. Epping and published by . This book was released on 2009 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: The increasing presence of foreign listings on U.S. exchanges provides additional investment opportunities but also increases the need for an understanding of the risks and rewards associated with these investments. The purpose of this study is to observe the extent to which U.S.-listed foreign firms report non-GAAP financial performance measures and to compare the characteristics of these disclosures to those of U.S. firms. The information provided by non-GAAP financial performance measures, as reported in press releases, has the potential to influence investor perceptions of firm performance in a misleading manner. Using a matched-sample design, this research compares U.S.-listed foreign firm and U.S. firm non-GAAP financial performance disclosure frequency, non-GAAP disclosure adjustment characteristics, reconciliation quality, and strategic non-GAAP disclosures. Tests of the hypotheses indicate similar disclosure frequencies for U.S. firms and U.S.-listed foreign firms. In addition, non-GAAP disclosure and adjustment characteristics that proxy intent to influence investor perceptions of firm performance are examined. Analyses of these disclosure characteristics provides evidence consistent with the interpretation that U.S. firms engage in aggressive non-GAAP reporting behaviors (providing disclosures to influence investor perceptions of firm performance in a misleading manner) equally or more so than U.S.-listed foreign firms. U.S. firms make larger adjustments to GAAP earnings to arrive at non-GAAP earnings than do U.S.-listed foreign firms. Similarly, U.S. firms make a higher number of adjustments to GAAP earnings to arrive at non-GAAP earnings than do U.S.-listed foreign firms. However, the likelihood of reporting income-increasing adjustments and the ratio of recurring adjustments to total adjustments were not found to be different for U.S. firms and U.S.-listed foreign firms. Inconsistent with this result is the finding that the quality of U.S. firm reconciliations is equal to or greater than that of U.S.-listed foreign firms. Investor protection, through a country's legal system and regulatory environment, impacts reporting behaviors. Regulation G addresses reconciliation quality, yet allows limited compliance exceptions for foreign registrants. Consequently, it appears that U.S. firms provide reconciliations of equal or greater quality than U.S.-listed foreign firms. Other non-GAAP disclosure behaviors lack regulation. Without regulation, it appears that U.S. firms show more signs of aggressive non-GAAP disclosure behavior than U.S.-listed foreign firms.

Information Content of Non-GAAP Earnings of Cross-Listed Companies

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Author :
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Information Content of Non-GAAP Earnings of Cross-Listed Companies by : Subash Adhikari

Download or read book Information Content of Non-GAAP Earnings of Cross-Listed Companies written by Subash Adhikari and published by . This book was released on 2018 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: To supplement earnings reported under generally accepted accounting principles (GAAP), public companies often voluntarily report alternative measures of earnings called non-GAAP earnings (NGE). These companies assert that NGE exclude the effect of non-recurring transactions, thereby helping users of financial information to better assess the company's past performance and prospects. Because NGE measures are not well defined, managers can exploit the inherent discretion in calculating NGE to mislead users. Prior studies provide arguments and evidence on the informative as well as opportunistic use of NGE. However, the studies have examined the characteristics and informativeness of NGE with a focus on U.S. companies. The results of studies that consider the NGE disclosure by U.S. companies may not be generalizable to the cross-listed companies because foreign financial reporting standards are different from the U.S. GAAP. Further, prior studies report a difference in earnings quality of U.S. firms and cross-listed firms, which can also result in a difference in the informativeness of their NGE. To fill this gap in literature, I examine whether the informativeness of NGE of cross-listed companies is different from that of U.S. companies. This study contributes to the debate on the informativeness of NGE. It provides evidence that in general, NGE are equally informative for U.S. and foreign companies but foreign companies are more opportunistic in excluding recurring items from NGE. The results of this study are of potential interest to investors, regulators, and academics who are interested in and interact with cross-listed companies.

SEC Intervention and Industry Guidance

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Author :
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis SEC Intervention and Industry Guidance by : Steve Fortin

Download or read book SEC Intervention and Industry Guidance written by Steve Fortin and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how the U.S. Securities and Exchange Commission (SEC) intervention in 2003 regarding non-GAAP disclosures affects the reporting of Funds from Operations (FFO), an industry-guided non-GAAP performance measure commonly reported by Real Estate Investment Trusts (REIT). We find that, contrary to the results of prior studies of pro forma earnings, the SEC intervention does not deter the reporting of FFO. Nonetheless, we show that the quality of FFO disclosures improves significantly subsequent to additional disclosure requirements and increased scrutiny by the SEC in 2003. In particular, we find that (1) companies are more likely to follow the industry guidance in defining FFO; (2) all exclusions from FFO have become more transitory following the SEC intervention; and (3) companies are less likely to manage the FFO measure to beat or meet analysts' forecasts. Lastly, we examine investors' perceptions regarding the usefulness of the FFO measure and find that the market perceives FFO as being more value relevant following the intervention of the SEC. Collectively, our findings suggest that, with sufficient industry guidance, the SEC can best achieve its objectives of improving the quality of non-GAAP reporting without the unintended consequences of deterring firms from reporting value relevant non-GAAP information.

The Value Relevance of a Non-GAAP Performance Metric to the Capital Markets

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Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Value Relevance of a Non-GAAP Performance Metric to the Capital Markets by : Susan Albring

Download or read book The Value Relevance of a Non-GAAP Performance Metric to the Capital Markets written by Susan Albring and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Our paper explores whether reducing management discretion in the reporting of performance is value relevant to capital markets. The study is driven by concerns raised by standard setters and others about the usefulness of performance reporting under Generally Accepted Accounting Principles (GAAP). Of primary interest is whether explicitly defining what information should be included in earnings results in an earnings measure that is more relevant than operating earnings computed according to current GAAP. The value relevance of this non-GAAP earnings measure is examined by estimating market valuation and returns models for 518 U.S. firms included in the Standard amp; Poor's 500 index over the time period 2002-2004. Results show that the explicitly defined non-GAAP measure used is significantly associated with equity market values and returns and is significantly more value relevant than the GAAP measure. Our paper contributes to accounting literature assessing the relevance of earnings in setting equity market value. More specifically, we provide evidence consistent with prior results that non-GAAP performance measures are more useful in valuation than GAAP earnings. However, in contrast to prior studies, the more explicit performance measure we examine removes some of the classificatory discretion pervasive in other non-GAAP earnings metrics. Our study also informs standard setters who are considering whether adjustments to current financial reports can increase their relevance to capital markets.

Non-GAAP Reporting Around Financial Restatements

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Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (119 download)

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Book Synopsis Non-GAAP Reporting Around Financial Restatements by : Christian Sofilkanitsch

Download or read book Non-GAAP Reporting Around Financial Restatements written by Christian Sofilkanitsch and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Research Handbook on Financial Accounting

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Author :
Publisher : Edward Elgar Publishing
ISBN 13 : 1803920599
Total Pages : 305 pages
Book Rating : 4.8/5 (39 download)

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Book Synopsis Research Handbook on Financial Accounting by : Luz Parrondo

Download or read book Research Handbook on Financial Accounting written by Luz Parrondo and published by Edward Elgar Publishing. This book was released on 2024-01-18 with total page 305 pages. Available in PDF, EPUB and Kindle. Book excerpt: Through careful classification of the opportunities and challenges facing current financial regulatory bodies, the Research Handbook on Financial Accounting inspects the financial implications of our ever-changing modern economic and environmental climate.

Bridging the Gap

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Publisher :
ISBN 13 : 9781942713319
Total Pages : pages
Book Rating : 4.7/5 (133 download)

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Book Synopsis Bridging the Gap by : Vincent T. Papa

Download or read book Bridging the Gap written by Vincent T. Papa and published by . This book was released on 2016-01-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: