Non-GAAP earnings: international overview and suggestions for future research

Abstract

Purpose: The purpose of this paper is to synthesize insights from existing research on the disclosure of non-generally accepted accounting principles (GAAP) earnings, from an international point of view, and to suggest several avenues for future research in this area. Design/methodology/approach: In conjunction with the analysis of existing research, the paper examines how different regulators and accounting standard setters have approached the topic of non-GAAP earnings disclosure. Findings: The paper shows how non-GAAP earnings have been found to be more informative than GAAP earnings in several scenarios (countries where non-GAAP disclosures are compulsory, countries where these disclosures are voluntary but regulated and countries where they are not regulated). However, in certain circumstances, these disclosures may also mislead investors. Corporate governance mechanisms can curb managers’ opportunistic use of these measures. Originality/value: The paper provides the growing number of academic researchers in this emerging area with a foundation and agenda upon which they can build their research.