Enforcing Tighter Regulation Over Non-GAAP Financial Measures

Non-GAAP Disclosures
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Non-GAAP Disclosures
The United States Securities Exchange Commission (SEC) is mandated with the task of protecting investors, facilitating capital information, as well as guaranteeing fairly and orderly functioning of the securities markets. It is within their reach to document the impact calculations of incomes or earnings not made according to generally accepted accounting principles (GAAP) have on the investors’ ability to make suitable investing decisions. There is no standardized approach for computing non-GAAP earnings making it difficult to compare them. In essence, this is the primary contentious issue between corporations and the present regulations set by the SEC. Nevertheless, there have been recurrent inconsistencies in many financial statements from various companies. This situation arises despite the implementation of specific regulations from the SEC. For instance, there was a significant variation in how companies report their non-GAAP earnings. An excellent example of IBM and HPE is used were for the former, presented the non-GAAP counterpart for each line of the income statement, whereas HPE adjusts only the bottom-line total. This arising circumstance compels the SEC to institute better and more specific measures.
Reporting in a more pre-defined way is way better for the investor who can precisely articulate the investment procedures of the company in question. The inconsistencies surrounding non-GAAP earnings can be relatively leveled in two ways. A corporate fairer can decide to present the non-GAAP counterpart for each line of the income ...