Mind the US earnings GAAP

For US companies, the gap between Gaap and reported earnings per share reached $19 last year, making a big difference to the perception of company profits.

937_COTW

US companies report their profits based on Generally Accepted Accounting Principles (Gaap), but are also allowed to come up with their own "adjusted" or "reported" figure.

This is the one that tends to hit the headlines as companies find a way to present their results in the best possible light. It will tend to include "EBS (Everything but Bad Stuff)", as a regulator once joked during the dotcom bubble. Absurdly contrived metrics such as "community-adjusted Ebitda" a recent gem from WeWork are common, says The Wall Street Journal's Rolfe Winkler.

All this makes a big difference to the perception of company profits. The gap between Gaap and reported earnings pershare reached $19 last year, a ten-year high.

Viewpoint

David Smith, The Sunday Times

Recommended

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?
US Economy

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?

America’s central bank is talking surprisingly tough about tightening monetary policy. And it’s not the only one. John Stepek looks at what it all mea…
23 Sep 2021
The end of the bond bull market, and how to invest for it
Investment strategy

The end of the bond bull market, and how to invest for it

The great bond bull market looks to be over, and you probably don’t want to be holding government bonds, says Merryn Somerset Webb. Here’s what you sh…
21 Sep 2021
Kieran Heinemann: the history of shareholder capitalism
Investment strategy

Kieran Heinemann: the history of shareholder capitalism

Merryn talks to Kieran Heinemann, author of Playing the Market: Retail Investment and Speculation in Twentieth-Century Britain, about the history of t…
17 Sep 2021
Why it pays to face up to your investment mistakes
Investment strategy

Why it pays to face up to your investment mistakes

Buying stocks can be a complicated business. But selling stocks can be tricky, too – even if you sell for the right reasons. Max King explains how to …
17 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
How to stop recurring subscriptions becoming a drain on your money
Personal finance

How to stop recurring subscriptions becoming a drain on your money

Tracking and pruning subscriptions isn’t as easy as it sounds. Here's how to take charge.
14 Sep 2021