The GAAP vs. Non-GAAP Dilemma

One of the thorniest issues investors must deal with is the use, or non-use, of GAAP (generally accepted accounting principles) earnings for companies they follow. Differences in data can arise from many sources. Should you count stock-based compensation? How about other non-recurring items? What do you do with merger-related expenses?

Managements always disclose GAAP earnings. They are often buried in the footnotes of Securities and Exchange Commission reports and earnings call transcripts. Companies would rather have analysts focus on higher "adjusted" earnings per share to make their stock valuations look cheaper. Restating EPS to carve out stock option expenses obscure true employee compensation levels, including those of company officers....267 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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