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Opinion

Non-GAAP Earnings Aren't The Solution

By Baruch Lev

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The astonishing proliferation of non-GAAP earnings... is a symptom, not a solution to GAAP's shortcomings.

The astonishing proliferation of non-GAAP earnings - reported by 90% of S&P 500 companies, according to a recent Seeking Alpha article - is a symptom, not a solution to GAAP's shortcomings. It's a symptom of the widespread belief among corporate executives that GAAP earnings no longer reflect the real performance of businesses, particularly due to the adverse impact on reported earnings of one-time items (restructuring charges, asset write-offs, marked-to-market of financial assets/liabilities), and various unreliable estimates underlying earnings computation (goodwill write-offs, stock option expense). These are legitimate managerial and investor concerns.

Read the full article as published on Seeking Alpha.

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Baruch Lev is the Philip Bardes Professor of Accounting and Finance.