Policy Implications of Research on Non-GAAP Reporting

Forthcoming, Research in Accounting Regulation

Tuck School of Business Working Paper No. 3160778

24 Pages Posted: 11 Apr 2018

See all articles by Dirk E. Black

Dirk E. Black

University of Nebraska at Lincoln - School of Accountancy

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting; University of Georgia

Date Written: March 1, 2018

Abstract

Over the past two decades, the regulatory landscape for non-GAAP reporting has evolved significantly. Despite a temporary decline in the frequency of non-GAAP reporting following Regulation G, the incidence of non-GAAP disclosure has continued to increase steadily, leading to a current all-time high in reporting activity. This proliferation of non-GAAP disclosure has captured the attention of standard setters and regulators in recent years. This paper provides an academic perspective on policy implications for both regulation and standard setting. We contend that current Compliance and Disclosure Interpretations (C&DIs) of the SEC staff may perhaps have gone too far in restricting certain types of non-GAAP disclosures. As a result, we advocate a slight relaxation of the current enforcement of Regulation G. We agree with FASB proposals for greater disaggregation in the income statement to allow for more transparency in non-GAAP reporting. Finally, we believe the PCAOB should consider requiring auditors to take a more direct role with respect to non-GAAP disclosures.

Keywords: Non-GAAP earnings, regulation, standard setting, auditing

JEL Classification: M41, M42, M48

Suggested Citation

Black, Dirk E. and Christensen, Theodore E., Policy Implications of Research on Non-GAAP Reporting (March 1, 2018). Forthcoming, Research in Accounting Regulation; Tuck School of Business Working Paper No. 3160778. Available at SSRN: https://ssrn.com/abstract=3160778 or http://dx.doi.org/10.2139/ssrn.3160778

Dirk E. Black (Contact Author)

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

University of Georgia ( email )

Athens, GA
United States

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