All companies in the US are required to report GAAP numbers according to the rules. Some companies choose not to follow the rules. But this is risky, because eventually someone with an accounting background will detect the discrepancies, and notify the SEC.
Thus, it's become fashionable to report both GAAP and adjusted numbers, and highlight the adjusted numbers in your press releases. Now the SEC can't get you. You've followed the rules and reported the GAAP numbers.
During the dot-com bubble, companies used to report GAAP earnings alongside EBITDA. Earnings before Interest, Taxes, Depreciation, and Amortization. In other words, we earned all this money, if you pretend that all of these other expenses didn't cost us anything.
As Warren Buffett pointed out: "References to EBITDA make us shudder — does management think the tooth fairy pays for capital expenditures?" Charlie Munger called them "bullsh_t earnings."
EBITDA eventually got such a bad rap that companies stopped using it after the dot-com bubble. These days, companies that want to distract from the GAAP numbers will report "non-GAAP" or "adjusted" earnings. This simply means that instead of mechanically excluding ITDA, each company makes its own decisions about what to exclude.
Thus, it's become fashionable to report both GAAP and adjusted numbers, and highlight the adjusted numbers in your press releases. Now the SEC can't get you. You've followed the rules and reported the GAAP numbers.
During the dot-com bubble, companies used to report GAAP earnings alongside EBITDA. Earnings before Interest, Taxes, Depreciation, and Amortization. In other words, we earned all this money, if you pretend that all of these other expenses didn't cost us anything.
As Warren Buffett pointed out: "References to EBITDA make us shudder — does management think the tooth fairy pays for capital expenditures?" Charlie Munger called them "bullsh_t earnings."
EBITDA eventually got such a bad rap that companies stopped using it after the dot-com bubble. These days, companies that want to distract from the GAAP numbers will report "non-GAAP" or "adjusted" earnings. This simply means that instead of mechanically excluding ITDA, each company makes its own decisions about what to exclude.