Mind the US earnings GAAP

S&P 500 difference between GAAP and reported earnings

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 per share reached $19 last year, a ten-year high.


“Sometimes… the crude lesson is drawn… that the only way of saving the planet is by giving up on growth. Not many sensible people say this explicitly, but many activists do, and it is not far below the surface even in some… heavyweight reports. One cites a 15% increase in global per capita use of materials since 1980 as one of the factors behind environmental degradation. It is, however, clear that you can have economic growth and do right by the planet. The UK’s expert committee on climate change, in a recent report, noted that there has been a 44% reduction in Britain’s greenhouse gas emissions since 1990, alongside a 75% increase in real GDP. Economic growth and reduced emissions have gone hand in hand… in the first 15 years of the current century there were more than 30 other countries…  that combined growth with falling emissions.”

David Smith, The Sunday Times