 Conditional conservatism in GAAP earnings and the implications for the disclosure of non-GAAP earningsBrandon D. Ater, Emre Kilic and Christian K. Sobngwi Advances in accounting, 2024, vol. 66, issue C Abstract: We examine whether and how the degree of conditional conservatism in GAAP earnings influences managers' decisions to disclose non-GAAP earnings. Conditional conservatism imposes a downward bias and may negatively affect the information content of GAAP earnings. However, prior research documents that non-GAAP earnings exhibit higher persistence, predictive ability, and information content than GAAP earnings. Consequently, we argue that companies may disclose non-GAAP earnings to circumvent the constraints imposed by conditional conservatism. Our evidence is consistent with the existence of a positive association between the degree of conditional conservatism in GAAP earnings and the decision by firms to disclose non-GAAP earnings. We also document a positive association between the extent of conditional conservatism in GAAP earnings and both the magnitude of non-GAAP exclusions and frequency of non-GAAP disclosures. Keywords: Non-GAAP earnings; Conditional conservatism; Special items (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:66:y:2024:i:c:s0882611023000457 DOI: 10.1016/j.adiac.2023.100686 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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