Barth et al. (Review of Accounting Studies, this issue, 2012) identify the perfect natural laboratory setting in which they explore important questions related to non-GAAP earnings disclosures. By focusing on a single income statement line item, stock compensation expense, they can directly compare the behavior of managers and analysts in excluding that item from GAAP earnings. Their empirical analyses indicate that managers exclude the expense for opportunistic reasons. They also conclude that analysts are more likely to exclude the expense in order to increase the predictability of current-period earnings for future earnings. I believe their evidence provides a solid contribution to the literature on non-GAAP reporting. Moreover, it provides important evidence regarding the effectiveness of SFAS 123R’s requirement for the recognition of stock compensation expense in providing relevant earnings information to stakeholders. I provide a few comments regarding aspects of the paper that require clarification or that may influence the design of future studies. Overall, I believe this research provides an important contribution to the non-GAAP literature and that it will have a significant influence on the design of future studies.
Review of Accounting Studies – Springer Journals
Published: Jul 4, 2012
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera