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The Daily

S&P 500 Companies Turn Loss into Gain by Using Non-GAAP Metrics

Chris Gaetano
Published Date:
May 11, 2016
'MIND THE GAP 5023794412' by Licensed under CC BY 2.0 via Wikimedia CommonsGenerally Accepted Accounting Principles (GAAP) aren't generally accepted at 26 S&P 500 companies, who MarketWatch found to have reported losses in GAAP but gains in the non-GAAP metrics they make themselves. So for example, if you follow GAAP, McDonald's slipped 1 percent in sales from a year before, but if you use the company's "constant currencies" basis, sales increased 3 percent. Twitter, meanwhile, didn't seem to like that GAAP figures showed they lost nearly $80 million in the first quarter, so the company emphasized an adjusted figure that excluded employee-based stock compensation. This move, according to MarketWatch, let Twitter say they made more than $100 million in profits instead. 

By law, public companies have to report in GAAP, but that doesn't mean they can't do their best to emphasize their own interpretations using their own metrics. The SEC has expressed concerns about this practice as potentially confusing investors, and chair Mary Jo White, in March, said the commission might seek to regulate their use.