Non-GAAP earnings disclosures around regulation G – The case of “implicit non-GAAP reporting”

Thielemann, Felix and Dinh, Tami,(28 June 2019), Non-GAAP earnings disclosures around regulation G – The case of “implicit non-GAAP reporting”. , Advances in Accounting, UNSPECIFIED

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We identify a phenomenon related to non-GAAP earnings disclosure and examine its prevalence around Regula- tion G (RegG). Specifically, we analyze to what extent firms only disclose adjustments to GAAP earnings instead of entire adjusted earnings figures thereby not providing the ideal non-GAAP to GAAP reconciliation promoted by RegG. We refer to this reporting behavior as “implicit non-GAAP reporting” and ask three different questions: How is “implicit non-GAAP reporting” related with the adoption of RegG? What type of firm reports implicit non-GAAP measures? What are the motives for “implicit non GAAP reporting” post-RegG? Our analyses yield three key findings. First, the frequency of “implicit non-GAAP reporting” spikes after the regulatory intervention but to a lesser degree also existed before. Second, during the post-RegG time period, the prevalence of “implicit non-GAAP reporting” is much higher among firms who only started to report non-GAAP earnings after RegG was enacted (starters) than among those, which continued to disclose non-GAAP earnings across the regulatory intervention (continuers). Third, we show that only for starters, “implicit non-GAAP reporting” is associated with motives of beating analyst earnings forecasts as well as experiencing GAAP losses. Our study provides important insights for regulators, firms and academics into "implicit non-GAAP reporting" by examining properties and determinants of implicit vs. explicit non-GAAP earnings for different types of firms around RegG.
Keywords : Non-GAAP earnings, Regulation G, Safe harbour, Implicit non-GAAP reporting, UNSPECIFIED
Journal or Publication Title: Advances in Accounting
Item Type: Article
Subjects: Akuntansi
Depositing User: Gunawan Gunawan
Date Deposited: 20 Dec 2019 00:44
Last Modified: 20 Dec 2019 00:44

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