Companies are increasingly accentuating the positive elements in their financial results, and trying to downplay the less flattering numbers.
As the New York Times reports, regulators still require public companies to report their financial results based on generally accepted accounting principals, or GAAP, and they still do so. But alongside this, more are increasingly also relying on non-GAAP results – tallies of their performance that can often include “massaged calculations” that indicate a better outcome.
In non-GAAP numbers, companies can leave out some of their costs of doing business, such as restructuring and acquisition costs, or stock-based compensation. In doing so, losses can be presented as profits, even when GAAP numbers show that’s not the case, according the story.
Experts quoted in the piece encourage investors to ignore the non-GAAP numbers and focus on the official results, in order to avoid any surprises.
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