ACNT 2375 – 40 Pt Case
Step 1: 15 pts
Read the article and prepare a paper that provides:
(1) A...

Question

ACNT 2375 – 40 Pt Case
Step 1: 15 pts
Read the article and prepare a paper that provides:
(1)    A summary of the article:  Use your own words.  Do not use quotations from the article – use your words for this summary.10 pts
(2)    Your meaningful comments on this issue. 5 pts (Clearly label your comments.  Be professional).  Avoid general statements such as ‘They just want to cheat. I fully agree.”) 5 pts
Step 2: 25 pts
From the article, select 3 items that were excluded in determining Non-GAAP EPS (items are discussed in the body of the article and in Table 1 of the article.  For each of these 3 items, find the GAAP.  DO NOT use the glossary or section 50 for this step.  For example, if you choose ‘Noncash interest expense on convertible debentures’. Find the GAAP (using the Codification) to locate current GAAP for this issue.
If there is pending GAAP, discuss this pending GAAP (including when it becomes effective).
The purpose of step 3 is to locate the current GAAP for the selected issues.  It is fine to cut and paste from the Codification.  Be sure to use the Printer Friendly feature at the bottom of the page.  This provides the full citation and proper formatting.  18 pts
For each of the 3 items, Include a

comment that shows how the exclusion of this issue would affect EPS (4 pts)
discussion of how you located the GAAP in the ASC (3 pts)

David · Accepted Answer

Is Non GAAP Reporting Is Unethical
Summary
There is a constant pressure on companies to report about the income numbers by excluding the unusual events that may seem unethical for reporting purposes.  One of unethical practices by the companies is to exclude the unusual events for reporting to the people. Therefore the SEC has issued accounting series release no 142 in 1973 stating that if the accounting net income does not provide an accurate reflection of economic performance of company it cannot be considered as appropriate solution in conformity with GAAP. Sarbanes Oxley act of 2002 considers the manipulative practices by companies about non GAAP financial measures and therefore SEC issued regulation G that provides conditions for the use of non-GAAP financial measures. The companies are required to use a non GAAP measure that is not misleading to the investors. Companies’ management must disclose reasons of using the non-GAAP measures.
Another use of Non GAAP measure is to determine in the area of executive payment. In this case the bonus payment is deductible if bonus results from achieving performance goals. But in this case, it is found that some companies change their bonus playbook for using non standard accounting measures for computation of bonus payment. One example of this act is revealed with the practices of Groupon Inc that invented a unique measure to hide the information from public. Many companies have excluded their GAAP earning and arrived at improved non GAAP performance. One example is of callaway golf company that excluded charges that are related to the cost reduction initiatives and gains and sales that are related to certain brands sale or transition of products to a third party.

ACNT 2375 – 40 Pt Case Step 1: 15 pts Read the article and prepare a paper that provides: (1) A summary of the article: Use your own words. Do not use quotations from the article – use your words for...

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