Fantasy Math Is Helping Companies Spin Losses Into Profits
Posted: Wed Apr 27, 2016 8:16 pm
[quote=http://www.nytimes.com/2016/04/24/busin ... ofits.html]What’s surprising, though, is how willing regulators have been to allow the proliferation of phony-baloney financial reports and how keenly investors have embraced them. As a result, major public companies reporting results that are not based on generally accepted accounting principles, or GAAP, has grown from a modest problem into a mammoth one.
According to a recent study in The Analyst’s Accounting Observer, 90 percent of companies in the Standard & Poor’s 500-stock index reported non-GAAP results last year, up from 72 percent in 2009.
Regulations still require corporations to report their financial results under accounting rules. But companies often steer investors instead to massaged calculations that produce a better outcome.
I know, I know — eyes glaze over when the subject is accounting. But the gulf between reality and make-believe in these companies’ operations is so wide that it raises critical questions about whether investors truly understand the businesses they own.[/quote]
According to a recent study in The Analyst’s Accounting Observer, 90 percent of companies in the Standard & Poor’s 500-stock index reported non-GAAP results last year, up from 72 percent in 2009.
Regulations still require corporations to report their financial results under accounting rules. But companies often steer investors instead to massaged calculations that produce a better outcome.
I know, I know — eyes glaze over when the subject is accounting. But the gulf between reality and make-believe in these companies’ operations is so wide that it raises critical questions about whether investors truly understand the businesses they own.[/quote]