Non-GAAP Earnings: Wishful Thinking or Real Profits?
— May 11, 2021
By Baruch Lev
What drew wide attention was Clorox's release of an "adjusted non-GAAP earnings" per share number of $1.62, after adding (canceling) the $2.11 impairment loss per share to the GAAP loss of 49 cents. So, in terms of non-GAAP earnings, recent quarter EPS was only a modest 14% lower than a year earlier, rather than the 126% drop on a GAAP basis. Quite a difference.
Clorox justified the elimination of the goodwill impairment charge from earnings as follows: "Management believes that the presentation excluding the impairment charges is useful to investors to assess operating performance on a consistent basis by removing the impact of impairment charges…"
Read the full Seeking Alpha article.
Baruch Lev is the Philip Bardes Professor of Accounting and Finance.