The drivers, consequences and policy implications of non-GAAP earnings reporting
Steven Young
Accounting and Business Research, 2014, vol. 44, issue 4, 444-465
Abstract:
Non-generally accepted accounting principles (GAAP) (pro forma) earnings form an increasingly important part of firms' performance reporting narrative. This paper reviews the academic and professional debate surrounding non-GAAP earnings reporting by management. I argue that the demand for customised performance reporting is a natural response to constraints imposed by a one-size-fits-all reporting system and that the non-GAAP phenomenon forms part of a long-standing debate over the definition and presentation of periodic performance. A review of extant research suggests non-GAAP disclosures are driven by informative reporting and opportunistic motives. Opaque presentation of non-GAAP earnings is associated with earnings mispricing, particularly among unsophisticated investor groups. Regulations and governance systems designed to ensure transparency are associated with higher quality disclosures and less mispricing. While customised reporting behaviour is evident in many settings, I argue that such disclosures create particular risks in a financial reporting context because they threaten the integrity of the underlying reporting system. Prevailing regulatory approaches are reviewed and factors limiting disclosure transparency are highlighted. The paper concludes with suggestions for further research.
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)
Downloads: (external link)
http://hdl.handle.net/10.1080/00014788.2014.900952 (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:taf:acctbr:v:44:y:2014:i:4:p:444-465
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RABR20
DOI: 10.1080/00014788.2014.900952
Access Statistics for this article
Accounting and Business Research is currently edited by Vivien Beattie
More articles in Accounting and Business Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().