Tesla, Non-GAAP Financial Measures, and the Securities & Exchange Commission’s Challenge: A Case Study Illustration

• In Event: Earnings Management--Cases

Abstract

This teaching case is intended to help undergraduate and graduate accounting students deepen their understanding of non-GAAP financial measures and related Securities and Exchange Commission (SEC) regulations. Students will also increase their understanding of how companies announce quarterly earnings, learn how to navigate SEC data bases and deepen their research skills.

Using the SEC’s recent challenge to Tesla on the company’s disclosure of non-GAAP financial measures in earnings press releases the student will gain an understanding of: the nature of non-GAAP financial measures, how they are derived, why they are being used by companies in their communications to investors, and which SEC regulations govern their reporting and disclosures. This teaching case will also require students become familiar with accounting standards (ASCs) on revenue recognition, deferred revenue and operating leases.

Authors

• Russell Engel, Southern Connecticut State University

• James Vincent Aselta, Southern Connecticut State University