The Determinants and Informativeness of Non-GAAP Revenue Disclosures
Nearly all research on non-GAAP measures focuses on earnings or earnings per share. Disclosure of non-GAAP revenue has recently attracted SEC scrutiny. Because revenue, unlike earnings, is a top-line number related primarily to core (i.e., persistent) business activities, it is unclear what adjustments could provide a more useful measure of performance. We present the first archival analysis of non-GAAP revenues based on a large, hand-collected sample of disclosures from 2015- 2018. Approximately one in five earnings announcements contains a non-GAAP revenue disclosure, focused on revenue growth. Our evidence suggests that firms disclose non-GAAP revenue when GAAP revenue is incomparable with prior periods, and not to compensate for poor GAAP performance. Furthermore, non-GAAP revenue growth predicts future revenue growth better than GAAP revenue growth, and the market responds to this information. Overall, nonGAAP revenue disclosures are motivated by economic fundamentals rather than opportunism, on average, and they provide investors with relevant information.
This is the accepted manuscript version of the following article: John L Campbell, Kurt H Gee, and Zac Wiebe, "The Determinants and Informativeness of Non-GAAP Revenue Disclosures," The Accounting Review, February 15, 2022, https://doi.org/10.2308/TAR-2020-0466.
|Work Title||The Determinants and Informativeness of Non-GAAP Revenue Disclosures|
|License||In Copyright (Rights Reserved)|
|Publication Date||February 15, 2022|
|Publisher Identifier (DOI)||
|Deposited||September 23, 2022|
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