Accounting News Roundup: Choosing a Small Firm Over Big 4 and Pharm Non-GAAP Fun | 07.18.16

Choosing a small firm over Big 4

Last week, we discussed the premise that Big 4 firms ruin the accounting profession for a lot of people and, in turn, put mid-sized and small firms at a huge disadvantage for finding good people. In this interview with Gary Gerson, founder of Gerson Preston, one of Miami's largest firms, there's a similar sentiment:

Our firm’s staff probably has more longevity than any other firm in the area, and we take great pride in that. Richard Preston, our managing partner, was one of my first staff members and passed up working for a Big Four accounting firm to work with us. Looking back 40 years, I think he made the right decision.

Okay, it's not quite as heavy of a Big 4 critique, but there's always a sense of pride from people who make a career in public accounting who never spent a day working in a Big 8 6 5 4 firm. Avoiding the herd does seem to work out well for a lot of people.

Non-GAAP worries

A new report from Credit Suisse focuses on the non-GAAP reporting of pharmaceutical companies and found that "the gap between standard and adjusted earnings figures rose to 38% in the first quarter of 2016" from 22% in Q1 of 2014. The report also found what caused the bulk of the difference:

Amortization expenses were the largest contributor to the difference between standard and adjusted net income for the pharma industry, the analysts said. Amortization expense added $36.9 billion to the industry’s non-GAAP net income over the past 13 quarters, Credit Suisse said.

The industry’s GAAP net income for the 13 quarters totalled $139 billion, while non-GAAP net income over the period totalled $194 billion, according to the bank.

If you're a classic worrier of non-GAAP metrics than you might be relieved that something as common as amortization is the main driver of the difference between GAAP and non-GAAP reporting. On the other Hans, if you're a purist, you still wouldn't give these measures a second look.

Previously, on Going Concern…

Late on Friday, I wrote about what can happen when you leave your work lying around. And in Open Items: someone asked about the Big 4 M&A due diligence groups.

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