When does forecasting GAAP earnings entail unreasonable effort?

• 成果类型: Article
• 署名作者: Laurion, Henry; Sloan, Richard
• 署名单位: University of Colorado System; University of Colorado Boulder; University of Southern California
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101437
• 发表日期: 2022
• 关键词: pro forma earnings; empirical-assessment; street earnings; disclosure; Managers

摘要

SEC rules require managers to reconcile their non-GAAP earnings forecasts with the most directly comparable GAAP forecasts unless doing so would entail 'unreasonable effort.' A significant number of managers rely on the unreasonable efforts exception to justify the omission of comparable GAAP forecasts. We analyze firms that rely on the unreasonable efforts exception and find that their non-GAAP earnings forecasts are more likely to exclude significant recurring expenses that are not excluded by analysts. Our results suggest that almost a third of managers exploit the unreasonable efforts exception to exclude significant recurring expenses from their earnings guidance. (c) 2021 Elsevier B.V. All rights reserved.