How Companies Are becoming Creative With Accounting

During the COVID-19 pandemic



The COVID-19 outbreak has brought out some creative accounting at companies, as executives attempt to gauge the impact of the pandemic on their businesses and how they would have performed if the crisis hadn’t all but shut the economy down.

Before companies began reporting first-quarter earnings, Twitter users joked that the outbreak would prompt new non-standard metrics that could be summarized as “earnings before COVID-19,” or EBITDAC, and they even created a series of coffee mugs that satirized the concept. Indeed, some companies chose to post earnings metrics that removed the pandemic’s impact.

“People will get creative telling their story and our message is to be cautious of the creativity,” said Sandy Peters, the head of global financial reporting policy at the CFA Institute in New York.

Uber Technologies Inc. UBER, -0.87%, for example, has always reported a range of non-GAAP measures, or those that do not comply with Generally Accepted Accounting Principles (GAAP), the U.S. accounting standard. Companies are allowed to supplement reporting with non-GAAP metrics, which they argue help provide insight into their underlying business, but they must lead with GAAP and offer a reconciliation of the two.

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Source: MarketWatch

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