The Reporting of Non-GAAP Income by the S&P 100

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Abstract

A non-GAAP financial measure is a numerical measure that adjusts the most directly comparable GAAP measure reported on the audited financial statements. On May 17, 2016, the Securities and Exchange Commission (SEC) issued new Compliance and Disclosure Interpretations (CD&Is) and modified others to enhance its guidance on the reporting of non-GAAP financial measures (SEC, 2016). Non-GAAP financial measures are often reported in a company’s quarterly, 10-Q, or annual, 10-K, financial report filings. They also can be reported in earnings releases and other forms of communication a company uses to provide additional insight into its business beyond that found in the financial statements prepared according to US GAAP.

This paper extends the research on non-GAAP financial measures by examining the annual non-GAAP income disclosure reported by S&P 100 as of 2013. The disclosures are retrieved from the companies’ fourth quarter earnings releases for 2011 through 2016. We believe this study will provide insight into the reconciliation items reported over this time period, the changes in the types and magnitude of items reported, and the sizes and industries of the companies disclosing non-GAAP income. This paper will serve as a comparison to Weber et al. (2013) to assess if changing regulation has impacted the reporting of non-GAAP income. The study will provide information useful to regulators, practitioners and academics, alike on the efficacy of this optional disclosure.

Authors

• Theresa F Henry, Seton Hall University

• David A. Rosenthal, Seton Hall University

• Rob R. Weitz, Seton Hall University