Posted On: 03/02/2016 10:54:38 PM
Post# of 8802
This explains gaap vs non gaap pretty well . I personally like to see non gaap as well as gaap. So you can see the actual earnings coming I'm that year.
GAAP Earnings
Standard financial reporting requirements are fairly prescriptive. Under GAAP, companies report earnings based on time-honored accounting principles like accrual accounting, revenue recognition and expense matching. For example, the matching principle requires that companies report expenses in the same period as related revenues. Thus, an automaker might report a quarterly depreciation expense associated with its factory. If the factory cost $100 million, the company might depreciate it evenly over 10 years and report a $2.5 million quarterly depreciation expense.
Non-GAAP Earnings
Companies may supplement GAAP earnings with non-GAAP measures. The rationale for allowing such departures is that management may have alternative ways of representing the company's "true" performance. In our earlier example, the company might choose to report earnings before depreciation. This is a popular adjustment because it offers investors a more accurate picture of the company's cash flow, since depreciation is a non-cash expense. Thus, the automaker might include a non-GAAP line item for earnings before interest, taxes, depreciation and amortization (EBITDA) that excludes the $2.5 million of quarterly depreciation.
GAAP Earnings
Standard financial reporting requirements are fairly prescriptive. Under GAAP, companies report earnings based on time-honored accounting principles like accrual accounting, revenue recognition and expense matching. For example, the matching principle requires that companies report expenses in the same period as related revenues. Thus, an automaker might report a quarterly depreciation expense associated with its factory. If the factory cost $100 million, the company might depreciate it evenly over 10 years and report a $2.5 million quarterly depreciation expense.
Non-GAAP Earnings
Companies may supplement GAAP earnings with non-GAAP measures. The rationale for allowing such departures is that management may have alternative ways of representing the company's "true" performance. In our earlier example, the company might choose to report earnings before depreciation. This is a popular adjustment because it offers investors a more accurate picture of the company's cash flow, since depreciation is a non-cash expense. Thus, the automaker might include a non-GAAP line item for earnings before interest, taxes, depreciation and amortization (EBITDA) that excludes the $2.5 million of quarterly depreciation.
(0)
(0)
