Mind the GAAP

Is a company making profit or a loss? Surprisingly, this question is becoming increasingly difficult to answer.

Limitations in financial reporting will only increase with time, and changes in accounting rules to mitigate those limitations will not occur soon. We support the view that whenever appropriate, managers must report pro-forma earnings while detailing and explaining the reason for each exclusion. Using that information, investors can form their own opinion about a company’s profitability by adding or subtracting items they feel are most appropriate. Read the whole post on Harvard Business Review.