October 7, 2022

Accounting News Roundup: Regulating Non-GAAP Measures and CFO Tenure | 03.17.16

SEC Signals It Could Curb Use of Adjusted Earnings Figures [WSJ]
The hand-wringing over non-GAAP measures has felt a little more intense this week and it's culminating with the SEC saying that it's thinking about doing something about it:

“It’s something that we are really looking at—whether we need to rein that in a bit even by regulation,“ SEC Chairman Mary Jo White said Wednesday at a conference of finance and business lobbyists in Washington. ”We have a lot of concern in that space.”

“Your investor relations folks, your CFO, they love the non-GAAP measures because they tell a better story,” White said. However! The SEC knows that while there's a lot of embellished stories out there, some stories are more embellished than others, and that some stories are quite enjoyable when they're embellished. So:

Regulators also say they don’t want to choke off non-GAAP reporting because many investors say it can be valuable in some circumstances.

“But you have to craft a rule that targets the abuses without killing what is valuable information,” says Tennessee professor Joseph Carcello. The art of regulation sounds terrible. Or terribly fun! I think we'll hear a lot more "better stories" and more worrying about them in the meantime.

Also in financial reporting: General Electric "is continuing its push to simplify financial reports for investors" by issuing a "graphics- and chart-heavy" 66-page summary of their annual report. I'm curious to see a designer's interpretation of excluding non-cash and non-recurring expenses.

Toshiba Shares Plunge as U.S. Unit Faces Accounting Probe [Bloomberg]
Toshiba's billion-dollar accounting chicanery has mostly been contained to its home country, Japan. But now, the Justice Department and SEC are sniffing around it:

The recent expansion by U.S. authorities, which are known to open cases even when another jurisdiction is already investigating, means Toshiba could face further enforcement action in America. The U.S. can exert jurisdiction in part because the allegations involve its Westinghouse Electric Co. unit, which is based in Cranberry Township, Pennsylvania. The report also names Ernst & Young LLP, which audited the Westinghouse accounts.

Toshiba has reassured anyone who will listen that everything is fine only to report more problems later. "Their track record isn’t great," says an analyst.

Ultimate Software CFO Credits Longevity on Quest to $1 Billion [CFOJ]
With the average tenure of CFOs around 5 years, Mitchell Dauerman staying at Ultimate Software Group for 20 is impressive. And he's managed to keep other people around too:

Mr. Dauerman adds he’s had the same controller for 20 years and a vice president of finance for 17 years. He and the company’s founder and chief executive, Scott Scherr have together spoken with investors for 72 quarterly conference calls.

At least somebody's figured it out.

Previously, on Going Concern…
I wrote about the AICPA's beef with an H&R Block video. And in Open Items someone has to choose an internship.

In other news:

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