Painting Net Income

In the old days (the 20th century) the use of Generally Accepted Accounting Principles (GAAP) by public corporations was commonplace. GAAP was a way to assess a company's performance, as it set a standard to which the vast majority of companies complied. While regulations have not changed and corporations are still required to report their financial results under accounting rules, corporations have devised ways to feature non-GAAP results. 

Almost all corporations are using non-GAAP results. According to a recent study in The Analyst’s Accounting Observer, 90 percent of companies in the Standard & Poor’s 500-stock index reported non-GAAP results last year, up from 72 percent in 2009. Why do they do this? Non-GAAP net income was up 6.6 percent in 2015 compared with the previous year. Under generally accepted accounting principles, net income in 2015 actually declined almost 11 percent from 2014. Some expenses omitted in non-GAAP presentations: restructuring and acquisition costs, stock-based compensation, write-downs of impaired assets, data breach, dividends on preferred stock, severance costs.