Non-GAAP Earnings: A Consistency and Comparability Crisis?

• 成果类型: Article
• 署名作者: Black, Dirk E.; Christensen, Theodore E.; Ciesielski, Jack T.; Whipple, Benjamin C.
• 署名单位: University of Nebraska System; University of Nebraska Lincoln; University System of Georgia; University of Georgia
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12671
• 发表日期: 2021
• 页码: 1712-1747
• 关键词: pro forma earnings; Managers; DISCLOSURES

摘要

We use a novel data set to examine the across-time consistency and across-firm comparability of firms' non-GAAP earnings disclosures. Given widespread concern about non-GAAP reporting among regulators, standard setters, the investor community, and academics, our investigation provides timely evidence on how managers' deviations from their own non-GAAP disclosure history, or the reporting of industry peers, affects how well earnings inform on firm performance. We begin by identifying firms that change their non-GAAP earnings definition from one year to the next. These deviations are uncommon, but when managers change the items they exclude in calculating non-GAAP earnings, the changes generally enhance the information in earnings about firms' core performance. We also examine whether non-GAAP earnings are more comparable than GAAP earnings and find that firms' non-GAAP adjustments result in greater earnings comparability. Finally, we examine instances in which firms deviate from common sector-wide definitions of non-GAAP earnings. We find that these deviations also result in earnings metrics that better represent firms' core operations. Overall, our results suggest that when managers vary their non-GAAP calculations, either across time or across firms, the resulting non-GAAP metrics generally enhance the information in earnings about firms' ongoing performance. Thus, our analysis helps mitigate concerns about why managers might vary their non-GAAP reporting calculations.