Thanks, Marty, it looks like some very interesting stuff there, some of the things they recommend doing are things I often at least eyeball when looking at Ks and Qs, but I didn't know it had become so formalized. This line of thought was only beginning when I was in B-school in the early 80's, and not being an accounting type, I hadn't followed how much it has apparently progressed since then.
Is there any move afoot to require reporting along these lines, either in addition to or instead of GAAP?
Even if there were such a change, though I think the real regulation that is needed is to prevent companies from reporting so-called pro forma earnings, or earnings before special charges, more prominently in press releases than they do the official version. And that in giving guidance to analysts, companies should be limited to doing so on FASB and SEC sanctioned concepts.
It's aggravating as heck to look at an analyst estimate, compare it to a company earnings release, and not know whether they refer to the same or different concepts of earnings. Regardless of the fundamentals, short term prices can be whipsawed by perceptions that companies have met, beaten, or fallen short of analyst estimates (especially with after-hours trading, where the market doesn't stop for the release). Yet with this type of accounting, your interpretation may depend on which press release you read. Sure you can figure it out given a few minutes (or hours), but while you're doing it you can lose a lot of money!
Regards,
Fund |
